Macroeconomic Fluctuations in Emerging Economies: An Unobserved Components Approach
AbstractWe employ a multivariate correlated unobserved components model to investigate the interaction between the permanent and transitory movements in output for two groups of emerging economies: one group in Asia and the other in Latin America. Our empirical framework enables us to assess the relative importance of permanent versus transitory shocks in driving output growth rate correlations across countries, providing an alternative to dynamic factor models for analyzing international co-movements. Our results suggest that GDP in all the emerging economies have highly variable stochastic permanent components with innovations that are negatively correlated with their respective transitory movements. We also find that the Asian countries in our sample share a significant fraction of innovations to output whereas output disturbances are largely idiosyncratic for the Latin American countries. These results lead us to conclude that Asia may be a plausible candidate for a monetary union, whereas Latin American countries do not seem similar enough in terms of macroeconomic fluctuations to gain from sharing a common currency.
Download InfoIf 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.
Bibliographic InfoPaper provided by School of Economics, University of Queensland, Australia in its series MRG Discussion Paper Series with number 3911.
Date of creation:
Date of revision:
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.:
- Gregory, Allan W & Head, Allen C & Raynauld, Jacques, 1997.
"Measuring World Business Cycles,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 677-701, August.
- C. John McDermott & Eswar Prasad & Pierre-Richard AgÃ©nor, 1999.
"Macroeconomic Fluctuations in Developing Countries - Some Stylized Facts,"
IMF Working Papers
99/35, International Monetary Fund.
- Agenor, Pierre-Richard & McDermott, C John & Prasad, Eswar S, 2000. "Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts," World Bank Economic Review, World Bank Group, vol. 14(2), pages 251-85, May.
- Alexander W. Hoffmaister & Jorge Roldos, 1997. "Are Business Cycles Different in Asia and Latin America?," IMF Working Papers 97/9, International Monetary Fund.
- Ronald McKinnon & Gunther Schnabl, 2002. "Synchronized Business Cycles in East Asia: Fluctuations in the Yen/Dollar Exchange Rate and China’s Stabilizing Role," Working Papers 02010, Stanford University, Department of Economics.
- Sunghyun Henry Kim & M. Ayhan Kose & Michael G. Plummer, 2003. "Dynamics of Business Cycles in Asia: Differences and Similarities," Review of Development Economics, Wiley Blackwell, vol. 7(3), pages 462-477, 08.
- Don Harding & Adrian Pagan, 2000.
"Disecting the Cycle: A Methodological Investigation,"
Econometric Society World Congress 2000 Contributed Papers
1164, Econometric Society.
- Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March.
- CÃ©sar CalderÃ³n & Rodrigo Fuentes., 2011.
"Characterizing the Business Cycles of Emerging Economies,"
Documentos de Trabajo
371, Instituto de Economia. Pontificia Universidad Católica de Chile..
- Calderon, Cesar & Fuentes, Rodrigo, 2010. "Characterizing the business cycles of emerging economies," Policy Research Working Paper Series 5343, The World Bank.
- Claudio H. dos Santos & Anwar Shaikh & Gennaro Zezza, 2003.
"Measures of the Real GDP of US Trading Partners: Methodology and Results,"
Economics Working Paper Archive
wp_387, Levy Economics Institute, The.
- Claudio H. Dos Santos & Anwar M. Shaikh & Gennaro Zezza, 2003. "Measures of the Real GDP of U.S. Trading Partners: Methodology and Results," International Trade 0309021, EconWPA.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Randal Anderson).
If references are entirely missing, you can add them using this form.