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Testing Real Business Cycles Models in an Emerging Economy

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  • Raphael Bergoeing
  • Raimundo Soto

Abstract

RBC models have been successful when applied to developed economies: their abilities in replicating the data of emerging countries remain largely unexplored. The rapid but unstable growth process in developing countries and their relatively less developed market structure pose a formidable challenge to neoclassical general equilibrium models. Using data of the Chilean economy, we explore the effects of market rigidities and macroeconomic policies on the dynamics of consumption, investment, inflation and factor markets. We find that business cycles models replicate much of the observed fluctuations of real and monetary variables in the Chilean economy, despite its idiosyncratic economic structure. Using a calibrated model we find that technology shocks, fiscal policies and labor market rigidities are the main sources of economic cycles, while monetary policies and wage indexation play a minor role. Econometric tests support the use of our calibrated model as an adequate representation of the Chilean data.

Suggested Citation

  • Raphael Bergoeing & Raimundo Soto, 2002. "Testing Real Business Cycles Models in an Emerging Economy," Working Papers Central Bank of Chile 159, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:159
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    Cited by:

    1. Rodrigo Caputo & Felipe Liendo & Juan Pablo Medina, 2006. "New Keynesian Models For Chile During The Inflation Targeting Regime: A Structural Approach," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 9(3), pages 73-95, December.
    2. Cerda, Rodrigo & Vergara, Rodrigo, 2007. "Unemployment insurance in Chile: Does it stabilize the business cycle?," Journal of Policy Modeling, Elsevier, vol. 29(3), pages 473-488.
    3. Miguel Braun & Luciano Di Gresia, 2003. "Towards Effective Social Insurance in Latin America: The Importance of Countercyclical Fiscal Policy," IDB Publications (Working Papers) 1463, Inter-American Development Bank.
    4. Francisco Gallego & Klaus Schmidt-Hebbel & Luis Servén, 2005. "General Equilibrium Dynamics of Foreign Shocks ans Policy Changes in Chile," Central Banking, Analysis, and Economic Policies Book Series,in: Rómulo A. Chumacero & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.), General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 4, pages 113-162 Central Bank of Chile.
    5. Peter Benczur & Attila Ratfai, 2010. "Economic fluctuations in Central and Eastern Europe: the facts," Applied Economics, Taylor & Francis Journals, vol. 42(25), pages 3279-3292.
    6. Elías Albagli I., 2005. "Denomination of the Debt of the Chilean Government: A Risk Management Perspective," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 8(3), pages 55-74, December.
    7. Rómulo A. Chumacero & Klaus Schmidt-Hebbel, 2005. "General Equilibrium Models: An Overview," Central Banking, Analysis, and Economic Policies Book Series,in: Rómulo A. Chumacero & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.), General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 1, pages 001-027 Central Bank of Chile.
    8. Raphael Bergoeing & Felipe Morandé & Facundo Piguillem, 2005. "Labor Market Distortions, Employment and Growth: The Recent Chilean Experience," Central Banking, Analysis, and Economic Policies Book Series,in: Rómulo A. Chumacero & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.), General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 12, pages 395-414 Central Bank of Chile.
    9. Patricio Jaramillo, 2009. "Estimación de Var Bayesianos para la Economía Chilena," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 24(1), pages 101-126, Junio.
    10. Roberto Duncan, 2003. "The Harberger-Laursen-Metzler Effect Revisited: An Indirect-Utility-Function Approach," Working Papers Central Bank of Chile 250, Central Bank of Chile.
    11. Rodrigo Caputo & Felipe Liendo & Juan Pablo Medina, 2007. "New Keynesian Models for Chile in the Inflation-Targeting Period," Central Banking, Analysis, and Economic Policies Book Series,in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 13, pages 507-546 Central Bank of Chile.
    12. Francisco A. Gallego & Klaus Schmidt-Hebbel & Luis Servén, 2004. "General Equilibrium Dynamics of External Shocks and Policy Changes in Chile," Working Papers Central Bank of Chile 271, Central Bank of Chile.
    13. Marcelo Ochoa & Patricio Valenzuela, 2004. "Impactos de un Shock Externo en un Modelo Estocástico de Equilibrio General para una Economía Abierta: El Caso de Chile," Macroeconomics 0407007, University Library of Munich, Germany.
    14. Se Kyu Choi-Ha & Luis Felipe Lagos, 2003. "El Dinero como Indicador Líder," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(120), pages 259-283.
    15. Lucas Navarro & Raimundo Soto, 2001. "Procyclical productivity : evidence from an emerging economy," Working Papers Central Bank of Chile 109, Central Bank of Chile.
    16. Raphael Bergoeing & Felipe Morandé, 2002. "Crecimiento, Empleo e Impuestos al Trabajo: Chile 1998-2001," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 39(117), pages 157-174.
    17. Calani, Mauricio, 2007. "Testing Globalization-Disinflation Hypothesis," MPRA Paper 4787, University Library of Munich, Germany, revised 10 Sep 2007.
    18. Miguel Braun & Luciano di Gresia, 2003. "Hacia un sistema de seguro social eficaz en América Latina: la importancia de una política fiscal anticíclica," Research Department Publications 4334, Inter-American Development Bank, Research Department.
    19. Roberto Duncan, 2003. "Floating, Official Dollarization, and Macroeconomic Volatility:An Analysis for the Chilean Economy," Working Papers Central Bank of Chile 249, Central Bank of Chile.
    20. Helmut Franken & Guillermo Le Fort & Eric Parrado, 2006. "Business Cycle Responses and the Resilence of the Chilean Economy," Central Banking, Analysis, and Economic Policies Book Series,in: Ricardo Caballero & César Calderón & Luis Felipe Céspedes & Norman Loayza (Series Editor) & Klaus Sc (ed.), External Vulnerability and Preventive Policies, edition 1, volume 10, chapter 4, pages 071-108 Central Bank of Chile.
    21. Norbert Fiess, 2004. "Chile's Fiscal Rule," Econometric Society 2004 Latin American Meetings 348, Econometric Society.
    22. Jimena Zúñiga & Marcelo Capello & Inés Butler & Nester Grión, 2013. "A Cycle-Adjusted Fiscal Rule for Sustainable and More Equitable Growth in Argentina," IDB Publications (Working Papers) 4638, Inter-American Development Bank.
    23. Roberto Duncan, 2005. "How Well Does a Monetary Dynamics Equilibrium Model Account for Chilean Data?," Central Banking, Analysis, and Economic Policies Book Series,in: Rómulo A. Chumacero & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.), General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 6, pages 189-220 Central Bank of Chile.
    24. Raphael Bergoeing & Facundo Piguillem, 2003. "Innovaciones en productividad y dinámica de plantas," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 18(2), pages 3-32, December.

    More about this item

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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