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What Drives Business Cycles And International Trade In Emerging Market Economies?



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    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.

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    Volume (Year): 28 (2010)
    Issue (Month): 61 (August)
    Pages: 198-271

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    Handle: RePEc:col:000107:008324
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    1. Hans Genberg, 2003. "Foreign versus domestic factors as sources of macroeconomic fluctuations in Hong Kong," IHEID Working Papers 05-2003, Economics Section, The Graduate Institute of International Studies.
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    8. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
    9. Fabio Canova, 2003. "The transmission of US shocks to Latin America," Economics Working Papers 925, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2004.
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    11. Pau Rabanal & Juan Rubio-Ramírez, 2008. "Comparing new Keynesian models in the Euro area: a Bayesian approach," Spanish Economic Review, Springer;Spanish Economic Association, vol. 10(1), pages 23-40, March.
    12. Hans Genberg & LaurentL. Pauwels, 2005. "An Open-Economy New Keynesian Phillips Curve: Evidence From Hong Kong," Pacific Economic Review, Wiley Blackwell, vol. 10(2), pages 261-277, 06.
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