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Interest Rates and Real Business Cycles in Emerging Markets (Yukselen Piyasalarda Faiz Oranlari ve Reel Is Cevrimleri)

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  • S. Tolga Tiryaki

Abstract

We study the quantitative effects of interest rates on the business cycles of emerging markets. The real business cycle model featured in Neumeyer and Perri ("Business cycles in emerging economies : The role of interest rates."Journal of Monetary Economics, March 2005, 52 (2), 345-380.) is calibrated to match Turkish data. Fluctuations in country spread account for only less than 9 percent of output volatility, less than one third of the value found in Neumeyer and Perri. We show that their result critically depends on the magnitude of the working capital parameter, the persistence of the productivity shocks, and the factor shares. We also discuss the effect of correlated shocks on the countercyclicality of the interest rate and net exports.

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Bibliographic Info

Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1008.

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Date of creation: 2010
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Handle: RePEc:tcb:wpaper:1008

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  1. Ferhan Salman, 2005. "Risk Aversion, Sovereign Bonds and Risk Premium," Working Papers 0514, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  2. 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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  17. Kose, M. Ayhan, 2002. "Explaining business cycles in small open economies: 'How much do world prices matter?'," Journal of International Economics, Elsevier, vol. 56(2), pages 299-327, March.
  18. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
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