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Real Business Cycles in Emerging Countries?

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  • Javier García-Cicco
  • Roberto Pancrazi
  • Martín Uribe

Abstract

We use more than one century of Argentine and Mexican data to estimate the structural parameters of a small-open-economy real-business-cycle model driven by nonstationary productivity shocks. We find that the RBC model does a poor job at explaining business cycles in emerging countries. We then estimate an augmented model that incorporates shocks to the country premium and financial frictions. We find that the estimated financial-friction model provides a remarkably good account of business cycles in emerging markets and, importantly, assigns a negligible role to nonstationary productivity shocks.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12629.

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Date of creation: Oct 2006
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Publication status: published as Garciaa-Cicco, Javier, Roberto Pancrazi, and Martín Uribe. “Real Business Cycles in Emerging Countries?" American Economic Review 100, 5 (December 2010): 2510-2531.
Handle: RePEc:nbr:nberwo:12629

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  1. Finn E. Kydland & Carlos E. J. M. Zarazaga, 2002. "Online Appendix to Argentina's Lost Decade and the Subsequent Recovery Puzzle," Technical Appendices kydland02, Review of Economic Dynamics.
  2. Martin Uribe & Vivian Yue, 2004. "Country spreads and emerging countries: who drives whom?," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  3. Roberto Chang & Andrés Fernández, 2010. "On the Sources of Aggregate Fluctuations in Emerging Economies," NBER Working Papers 15938, National Bureau of Economic Research, Inc.
  4. Reinhart, Carmen & Vegh, Carlos, 1995. "Nominal interest rates, consumption booms, and lack of credibility: A quantitative examination," MPRA Paper 13898, University Library of Munich, Germany.
  5. Mark Aguiar & Gita Gopinath, 2004. "Emerging market business cycles: the cycle is the trend," Working Papers 04-4, Federal Reserve Bank of Boston.
  6. Aguiar, Mark & Gopinath, Gita, 2007. "Emerging Market Business Cycles: The Cycle is the Trend," Scholarly Articles 11988098, Harvard University Department of Economics.
  7. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  8. Cogley, Timothy & Nason, James M, 1995. "Output Dynamics in Real-Business-Cycle Models," American Economic Review, American Economic Association, vol. 85(3), pages 492-511, June.
  9. Tauchen, George, 1985. "Diagnostic testing and evaluation of maximum likelihood models," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 415-443.
  10. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
  11. Finn E. Kydland & Carlos E.J.M. Zarazaga, 2001. "Argentina's lost decade," Center for Latin America Working Papers 0401, Federal Reserve Bank of Dallas.
  12. Neumeyer, Pablo Andrés & Perri, Fabrizio, 2004. "Business Cycles in Emerging Economies: The Role of Interest Rates," CEPR Discussion Papers 4482, C.E.P.R. Discussion Papers.
  13. Susanto Basu & Alan M. Taylor, 1999. "Business Cycles in International Historical Perspective," NBER Working Papers 7090, National Bureau of Economic Research, Inc.
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  1. On Powerful Macroeconomic Concepts: Consumption Smoothing
    by paragwaknis in Musings of the Sorts on 2013-03-29 01:04:36
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