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What Drives Business Cycles and International Trade in Emerging Market Economies?

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  • Marcelo Sánchez

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Abstract

This paper investigates the role of domestic and external factors in explaining business cycle and international trade developments in fifteen emerging market economies. Results from sign-restricted VARs show that developments in real output, inflation and international trade variables are dominated by domestic shocks. External shocks, on average, explain a fraction of no more than 10% of the variation in the endogenous variables considered. Concerning impulse responses, consumer prices and real imports are overall the endogenous variables most affected by domestic disturbances. Consumer prices are mostly driven by technology and risk premium shocks. The shocks inducing the largest effects tend to be monetary disturbances, which can be traced to unpredictable monetary policy. These shocks generate relatively large impacts on real imports, which —owing to muted reactions in real exports—, carry over to the trade balance, alongside more modest changes in consumer prices and real output.

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  • Marcelo Sánchez, 2010. "What Drives Business Cycles and International Trade in Emerging Market Economies?," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 28(61), pages 198-271, August.
  • Handle: RePEc:bdr:ensayo:v:28:y:2010:i:61:p:198-271
    DOI: 10.32468/Espe.6106
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    File URL: https://doi.org/10.32468/Espe.6106
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    Cited by:

    1. Piotr Krupa & Paweł Skrzypczyński, 2012. "Are business cycles in the US and emerging economies synchronized?," NBP Working Papers 111, Narodowy Bank Polski, Economic Research Department.

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    More about this item

    Keywords

    business cycles; International Trade; Emerging Markets; Structural Shocks;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • 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

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