Characterizing the Business Cycles of Emerging Economies
AbstractWe document the properties of business cycles using the dating algorithm by Harding andPagan (2002) on a quarterly database for 58 countries Â—21 industrial countries and 37 emerging market economies (EMEs)Â— from 1970q1 to 2007q4. We find that: (a) recessions are deeper, steeper and costlier among EMEs (especially, in East Asia and Latin America) and that recoveries are swifter and stronger. (b) Recessions have become less costly during the globalization period (1990-2007) than before (1970-89) for industrial countries and EMEs. (c) The main characteristics of downturns are amplified when associated to crisis episodes. (d) The time path of macroeconomic indicators around peaks in real GDP is more volatile in downturns associated with crisis compared to other downturns. (e) Financial cycles (credit and asset prices) tend to precede real output cycles. (f) Credit and stock prices are strongly pro-cyclical while real exchange rates, capital flows and terms of trade tend to be a-cyclical. Finally, an exploratory analysis on the conditional correlates of the cost of recessions shows that: (i) adverse terms of trade shocks raise the cost of recessions in countries with a more open trade regime and deeper financial markets. (ii) Recessions tend to be deeper if they coincide with a sudden stop, but the effect is smaller in countries with deeper domestic credit markets. (iii) Floating exchange rate regimes appear to act as shock absorbers.
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Bibliographic InfoPaper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 371.
Date of creation: 2011
Date of revision:
Business cycles; peaks and troughs; emerging markets;
Other versions of this item:
- Calderon, Cesar & Fuentes, Rodrigo, 2010. "Characterizing the business cycles of emerging economies," Policy Research Working Paper Series 5343, The World Bank.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-25 (All new papers)
- NEP-CBA-2010-09-25 (Central Banking)
- NEP-CWA-2010-09-25 (Central & Western Asia)
- NEP-MAC-2010-09-25 (Macroeconomics)
- NEP-OPM-2010-09-25 (Open Economy Macroeconomic)
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.:
- Mark Aguiar & Gita Gopinath, 2004.
"Emerging Market Business Cycles: The Cycle is the Trend,"
NBER Working Papers
10734, National Bureau of Economic Research, Inc.
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- Mark Aguiar & Gita Gopinath, 2004. "Emerging market business cycles: the cycle is the trend," Working Papers 04-4, Federal Reserve Bank of Boston.
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- Victor Zarnowitz & Ataman Ozyildirim, 2001.
"Time Series Decomposition and Measurement of Business Cycles, Trends and Growth Cycles,"
Economics Program Working Papers
01-03, The Conference Board, Economics Program.
- Zarnowitz, Victor & Ozyildirim, Ataman, 2006. "Time series decomposition and measurement of business cycles, trends and growth cycles," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1717-1739, October.
- Victor Zarnowitz & Ataman Ozyildirim, 2002. "Time Series Decomposition and Measurement of Business Cycles, Trends and Growth Cycles," NBER Working Papers 8736, National Bureau of Economic Research, Inc.
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