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Time to produce and emerging market crises

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  • Schwartzman, Felipe

Abstract

After emerging market crises, value added falls more in manufacturing industries that normally exhibit higher inventory/cost ratios. Moreover, the difference in value added between manufacturing industries with different inventory/cost ratios persists years into the recovery. A shock to aggregate TFP cannot by itself match this pattern. In contrast, a persistent increase in the cost of foreign capital can. In the context of a calibrated multisector small open economy model, a shock to the cost of foreign capital consistent with the cross-industry data leads, 3–5years after the onset of the crisis, to an average reduction of output relative to a trend of 5.4 percent.

Suggested Citation

  • Schwartzman, Felipe, 2014. "Time to produce and emerging market crises," Journal of Monetary Economics, Elsevier, vol. 68(C), pages 37-52.
  • Handle: RePEc:eee:moneco:v:68:y:2014:i:c:p:37-52
    DOI: 10.1016/j.jmoneco.2014.07.010
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    2. Occhino, Filippo & Pescatori, Andrea, 2015. "Debt overhang in a business cycle model," European Economic Review, Elsevier, vol. 73(C), pages 58-84.
    3. Se-Jik Kim & Hyun Song Shin, 2013. "Working Capital, Trade and Macro Fluctuations," Working Papers 1465, Princeton University, Department of Economics, Center for Economic Policy Studies..
    4. repec:pri:cepsud:235shin is not listed on IDEAS
    5. Sangeeta Pratap & Carlos Urrutia, 2012. "Financial Frictions and Total Factor Productivity: Accounting for the Real Effects of Financial Crises," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(3), pages 336-358, July.
    6. Felipe Schwartzman, 2012. "When do credit frictions matter for business cycles?," Economic Quarterly, Federal Reserve Bank of Richmond, issue 3Q, pages 209-230.
    7. repec:eee:quaeco:v:67:y:2018:i:c:p:191-218 is not listed on IDEAS
    8. Sarte, Pierre-Daniel & Schwartzman, Felipe & Lubik, Thomas A., 2015. "What inventory behavior tells us about how business cycles have changed," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 264-283.

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