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Real Business Cycles in Emerging Countries?

Author

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  • Javier Garcia-Cicco
  • Roberto Pancrazi
  • Martin Uribe

Abstract

We use more than a 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 of 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. (JEL E13, E32, E44, F43, O11, O16)

Suggested Citation

  • Javier Garcia-Cicco & Roberto Pancrazi & Martin Uribe, 2010. "Real Business Cycles in Emerging Countries?," American Economic Review, American Economic Association, vol. 100(5), pages 2510-2531, December.
  • Handle: RePEc:aea:aecrev:v:100:y:2010:i:5:p:2510-31
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    References listed on IDEAS

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    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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