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

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  • Marcelo Sánchez

Abstract

This paper investigates the role of domestic and externalfactors in explaining business cycle and internationaltrade developments in fifteen emergingmarket economies. Results from sign-restrictedVARs show that developments in real output, inflationand international trade variables are dominatedby domestic shocks. External shocks, on average, explaina fraction of no more than 10% of the variationin the endogenous variables considered. Concerningimpulse responses, consumer prices and real importsare overall the endogenous variables most affected bydomestic disturbances. Consumer prices are mostlydriven by technology and risk premium shocks. Theshocks inducing the largest effects tend to be monetarydisturbances, which can be traced to unpredictablemonetary policy. These shocks generate relativelylarge impacts on real imports, which -owing tomuted reactions in real exports-, carry over to thetrade balance, alongside more modest changes inconsumer prices and real output.

Suggested Citation

  • Marcelo Sánchez, 2010. "What Drives Business Cycles and International Trade in Emerging Market Economies?," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, vol. 28(61), pages 198-271, August.
    • Handle: RePEc:col:000107:008324
    DOI: 10.32468/Espe.6106
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    Cited by:

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

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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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