Advanced Search
MyIDEAS: Login to save this paper or follow this series

Accounting for Output Drops in Latin America

Contents:

Author Info

  • Ruy Lama
Registered author(s):

Abstract

This paper evaluates what type of models can account for the recent episodes of output drops in Latin America. I develop an open economy version of the business cycle accounting methodology (Chari, Kehoe, and McGrattan, 2007) in which output fluctuations are decomposed into four sources: total factor productivity (TFP), a labor wedge, a capital wedge, and a bond wedge. The paper shows that the most promising models are the ones that induce fluctuations of TFP and the labor wedge. On the other hand, models of fnancial frictions that translate into a bond or capital wedge are not successful in explaining output drops in Latin America. The paper also discusses the implications of these results for policy analysis using alternative DSGE models.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=22784
Download Restriction: no

Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/67.

as in new window
Length: 49
Date of creation: 01 Mar 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/67

Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Email:
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC

Order Information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

Related research

Keywords: Latin America; Emerging markets; Labor productivity; Economic models; bond; business cycle; business cycles; total factor productivity; bonds; growth model; gdp per capita; neoclassical growth model; international bond; international bonds; money market; costs of business cycles; stock of capital; money market interest; money market interest rate; growth rate; financial markets; international capital markets; international interest rates; international capital; real business cycle; foreign bonds; currency crises; currency crisis; international financial statistics; growth rates; business cycle fluctuations; real business cycles;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Mark Aguiar & Gita Gopinath, 2004. "Emerging market business cycles: the cycle is the trend," Working Papers, Federal Reserve Bank of Boston 04-4, Federal Reserve Bank of Boston.
  2. L. Wade, 1988. "Review," Public Choice, Springer, Springer, vol. 58(1), pages 99-100, July.
  3. Felipe Meza, 2008. "Financial Crisis, Fiscal Policy, and the 1995 GDP Contraction in Mexico," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 40(6), pages 1239-1261, 09.
  4. Lagos, R., 2001. "A Model of TFP," Working Papers, C.V. Starr Center for Applied Economics, New York University 01-08, C.V. Starr Center for Applied Economics, New York University.
  5. Javier Garcia-Cicco & Roberto Pancrazi & Martin Uribe, 2010. "Real Business Cycles in Emerging Countries?," American Economic Review, American Economic Association, American Economic Association, vol. 100(5), pages 2510-31, December.
  6. Mark Gertler & Simon Gilchrist & Fabio M. Natalucci, 2007. "External Constraints on Monetary Policy and the Financial Accelerator," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 39(2-3), pages 295-330, 03.
  7. Juan M. Sanchez & Horacio Sapriza & Gabriel Cuadra, 2009. "Fiscal Policy and Default Risk in Emerging Markets," 2009 Meeting Papers, Society for Economic Dynamics 701, Society for Economic Dynamics.
  8. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, American Economic Association, vol. 81(4), pages 797-818, September.
  9. Raphael Bergoeing & Patrick J. Kehoe & Raimundo Soto, 2001. "A Decade Lost and Found: Mexico and Chile in the 1980s," Working Papers Central Bank of Chile, Central Bank of Chile 107, Central Bank of Chile.
  10. Fabio Braggion & Lawrence J. Christiano & Jorge Roldos, 2007. "Optimal Monetary Policy in a 'Sudden Stop'," NBER Working Papers 13254, National Bureau of Economic Research, Inc.
  11. Peter N. Ireland, 1999. "A Method for Taking Models to the Data," Boston College Working Papers in Economics, Boston College Department of Economics 421, Boston College Department of Economics.
  12. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
  13. Alejandro Izquierdo & Ernesto Talvi & Guillermo A Calvo, 2006. "Phoenix miracles in emerging markets: recovering without credit from systemic financial crises," BIS Working Papers 221, Bank for International Settlements.
  14. Diego Restuccia & Richard Rogerson, 2007. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," NBER Working Papers 13018, National Bureau of Economic Research, Inc.
  15. Stephanie Schmitt-Grohe & Martin Uribe, 2001. "Stabilization policy and the costs of dollarization," Proceedings, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, pages 482-517.
  16. Pablo A. Neumeyer & Fabrizio Perri, 2004. "Business cycles in emerging economies: the role of interest rates," Staff Report, Federal Reserve Bank of Minneapolis 335, Federal Reserve Bank of Minneapolis.
  17. Michael D. Bordo & Christopher J. Erceg & Charles N. Evans, 1997. "Money, Sticky Wages, and the Great Depression," NBER Working Papers 6071, National Bureau of Economic Research, Inc.
  18. McGrattan, Ellen R & Rogerson, Richard & Wright, Randall, 1997. "An Equilibrium Model of the Business Cycle with Household Production and Fiscal Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 267-90, May.
  19. Susanto Basu & Miles S. Kimball, 1997. "Cyclical Productivity with Unobserved Input Variation," NBER Working Papers 5915, National Bureau of Economic Research, Inc.
  20. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, Elsevier, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
  21. Campbell, John Y., 1994. "Inspecting the mechanism: An analytical approach to the stochastic growth model," Journal of Monetary Economics, Elsevier, Elsevier, vol. 33(3), pages 463-506, June.
  22. Correia, Isabel & Neves, Joao C. & Rebelo, Sergio, 1995. "Business cycles in a small open economy," European Economic Review, Elsevier, Elsevier, vol. 39(6), pages 1089-1113, June.
  23. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007. "Business Cycle Accounting," Econometrica, Econometric Society, Econometric Society, vol. 75(3), pages 781-836, 05.
  24. Schmitt-Grohe, Stephanie & Uribe, Martin, 2003. "Closing small open economy models," Journal of International Economics, Elsevier, Elsevier, vol. 61(1), pages 163-185, October.
  25. V.V. Chari & Patrick Kehoe & Ellen R. McGrattan, 2005. "Sudden Stops and Output Drops," NBER Working Papers 11133, National Bureau of Economic Research, Inc.
  26. Casey B. Mulligan, 2002. "A Century of Labor-Leisure Distortions," NBER Working Papers 8774, National Bureau of Economic Research, Inc.
  27. Timothy J. Kehoe & Edward C. Prescott, 2002. "Great Depressions of the Twentieth Century," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 1-18, January.
  28. Lee Ohanian & Andrea Raffo & Richard Rogerson, 2006. "Long-term changes in labor supply and taxes: evidence from OECD countries, 1956-2004," Research Working Paper, Federal Reserve Bank of Kansas City RWP 06-16, Federal Reserve Bank of Kansas City.
  29. Lawrence J. Christiano & Christopher Gust & Jorge Roldos, 2002. "Monetary policy in a financial crisis," Working Paper 0204, Federal Reserve Bank of Cleveland.
  30. Jordi Galí & Mark Gertler & J. David López-Salido, 2005. "Markups, gaps and the welfare costs of business fluctuations," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 836, Department of Economics and Business, Universitat Pompeu Fabra.
  31. Ellen R. McGrattan, 1991. "The macroeconomic effects of distortionary taxation," Discussion Paper / Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis 37, Federal Reserve Bank of Minneapolis.
  32. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers, Department of Economics, Williams College 2001-11, Department of Economics, Williams College.
  33. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Staff Report, Federal Reserve Bank of Minneapolis 102, Federal Reserve Bank of Minneapolis.
  34. Sungbae An & Frank Schorfheide, 2007. "Bayesian Analysis of DSGE Models," Econometric Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 26(2-4), pages 113-172.
  35. Roberto Chang & Andrés Fernández, 2013. "On The Sources Of Aggregate Fluctuations In Emerging Economies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 1265-1293, November.
  36. Aguiar, Mark & Gopinath, Gita, 2007. "Emerging Market Business Cycles: The Cycle is the Trend," Scholarly Articles 11988098, Harvard University Department of Economics.
  37. Reinhart, Carmen & Kaminsky, Graciela & Vegh, Carlos, 2004. "When it rains, it pours: Procyclical capital flows and macroeconomic policies," MPRA Paper 13883, University Library of Munich, Germany.
  38. Philip R. Lane & Gian-Maria Milesi-Ferretti, 2006. "The External Wealth of Nations Mark II," IMF Working Papers 06/69, International Monetary Fund.
  39. Robert E. Hall, 1997. "Macroeconomic Fluctuations and the Allocation of Time," NBER Working Papers 5933, National Bureau of Economic Research, Inc.
  40. Gonzalo Fernández de Córdoba & Timothy J. Kehoe, 2009. "The current financial crisis: what should we learn from the great depressions of the Twentieth Century?," Staff Report, Federal Reserve Bank of Minneapolis 421, Federal Reserve Bank of Minneapolis.
  41. Harold L. Cole & Lee E. Ohanian, 2001. "New Deal policies and the persistence of the Great Depression: a general equilibrium analysis," Working Papers, Federal Reserve Bank of Minneapolis 597, Federal Reserve Bank of Minneapolis.
  42. Lawrence J. Christiano & Joshua M. Davis, 2006. "Two flaws in business cycle accounting," Working Paper Series, Federal Reserve Bank of Chicago WP-06-10, Federal Reserve Bank of Chicago.
  43. Giorgio Primiceri & Ernst Schaumburg & Andrea Tambalotti, 2006. "Intertemporal disturbances," 2006 Meeting Papers, Society for Economic Dynamics 355, Society for Economic Dynamics.
  44. James J. Heckman & Carmen Pages, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," NBER Working Papers 7773, National Bureau of Economic Research, Inc.
  45. Rabanal, Pau & Tuesta, Vicente, 2010. "Euro-dollar real exchange rate dynamics in an estimated two-country model: An assessment," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 34(4), pages 780-797, April.
  46. Kehoe, Timothy J. & Ruhl, Kim J., 2009. "Sudden stops, sectoral reallocations, and the real exchange rate," Journal of Development Economics, Elsevier, Elsevier, vol. 89(2), pages 235-249, July.
  47. King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics, Elsevier, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007 Elsevier.
  48. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1991. "Homework in Macroeconomics: Household Production and Aggregate Fluctuations," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(6), pages 1166-87, December.
  49. Enrique G. Mendoza, 2006. "Endogenous Sudden Stops in a Business Cycle Model with Collateral Constraints:A Fisherian Deflation of Tobin's Q," NBER Working Papers 12564, National Bureau of Economic Research, Inc.
  50. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, American Economic Association, vol. 78(3), pages 402-17, June.
  51. Luis Felipe Cespedes & Roberto Chang & Andres Velasco, 2000. "Balance Sheets and Exchange Rate Policy," NBER Working Papers 7840, National Bureau of Economic Research, Inc.
  52. Thomas Lubik & Frank Schorfheide, 2005. "A Bayesian Look at New Open Economy Macroeconomics," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 521, The Johns Hopkins University,Department of Economics.
  53. Parkin, Michael, 1988. "A method for determining whether parameters in aggregative models are structural," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 29(1), pages 215-252, January.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Lama, Ruy & Urrutia, Carlos, 2012. "Employment Protection and Business Cycles in Emerging Economies," Working Papers, Banco Central de Reserva del Perú 2012-003, Banco Central de Reserva del Perú.
  2. Seon Tae Kim, 2014. "The Price of Imports and TFP: Application to the Korean Crisis of 1997-98," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(1), pages 39-51, January.
  3. Fricke, Hans & Süssmuth, Bernd, 2013. "Growth and volatility of tax revenues in Latin America," Working Papers 124, University of Leipzig, Faculty of Economics and Management Science.
  4. Dooyeon Cho & Antonio Doblas-Madrid, 2013. "Business Cycle Accounting East and West: Asian Finance and the Investment Wedge," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 724-744, October.
  5. Keisuke Otsu, 2012. "How well can business cycle accounting account for business cycles?," Economics Bulletin, AccessEcon, vol. 32(2), pages 1774-1784.
  6. Jesús Rodríguez López & Mario Solís-García, 2012. "Accounting Spanish business cycles: What can be learned from past recessions?," Working Papers 12.05, Universidad Pablo de Olavide, Department of Economics.
  7. Fricke, Hans & Süssmuth, Bernd, 2014. "Growth and Volatility of Tax Revenues in Latin America," World Development, Elsevier, Elsevier, vol. 54(C), pages 114-138.
  8. Bridji, Slim, 2013. "The French Great Depression: A business cycle accounting analysis," Explorations in Economic History, Elsevier, Elsevier, vol. 50(3), pages 427-445.
  9. Chakraborty, Suparna & Otsu, Keisuke, 2012. "Deconstructing Growth - A Business Cycle Accounting Approach with application to BRICs," MPRA Paper 41076, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:09/67. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.