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Investment Specific Technology Shocks and Emerging Market Business Cycle Dynamics

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  • Aydan Dogan

    (Universitat de Barcelona)

Abstract

This article explores the role played by investment-specific technology (IST) shocks in emerging market business cycle fluctuations. The analysis is motivated by two key empirical facts; the presence of IST change in the post-war US economy combined with the importance of US investment goods in the emerging market imports. The goal is to quantify the contribution of US IST change for the business cycles of an emerging country in the context of a two-country, two-sector international real business cycle framework with investment and consumption goods sectors. Specifically, I estimate the model using Mexican and US data and find that a permanent US-originating IST shock is important in explaining Mexican business cycle dynamics. Shocks to investment sector technology explain around 60% of the investment, 44% of the consumption and 52% of the output variability. I argue that both a shock that captures financial frictions and a permanent US-originating IST shock are necessary to account for the key business cycle features in the data. (Copyright: Elsevier)

Suggested Citation

  • Aydan Dogan, 2019. "Investment Specific Technology Shocks and Emerging Market Business Cycle Dynamics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 34, pages 202-220, October.
  • Handle: RePEc:red:issued:18-377
    DOI: 10.1016/j.red.2019.03.012
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    Cited by:

    1. Pierre-Richard Agénor & Timothy P. Jackson & Luiz Pereira da Silva, 2020. "Cross-Border Regulatory Spillovers and Macroprudential Policy Coordination," Working Papers 202028, University of Liverpool, Department of Economics.
    2. Pierre-Richard Agénor & Timothy P. Jackson & Luiz Pereira da Silva, 2020. "Foreign Exchange Intervention and Financial Stability," Working Papers 202027, University of Liverpool, Department of Economics.
    3. Seunghoon Na & Hyunseung Oh, 2020. "Computerizing Households and the Role of Investment-Specific Productivity in Business Cycles," International Finance Discussion Papers 1292, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    Keywords

    Emerging markets; Investment-specific technology shocks; International real business cycles;

    JEL classification:

    • 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
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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