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Characterizing the Business Cycles of Emerging Economies

Listed author(s):
  • César Calderón
  • Rodrigo Fuentes.


We document the properties of business cycles using the dating algorithm by Harding andPagan (2002) on a quarterly database for 58 countries —21 industrial countries and 37 emerging market economies (EMEs)— from 1970q1 to 2007q4. We find that: (a) recessions are deeper, steeper and costlier among EMEs (especially, in East Asia and Latin America) and that recoveries are swifter and stronger. (b) Recessions have become less costly during the globalization period (1990-2007) than before (1970-89) for industrial countries and EMEs. (c) The main characteristics of downturns are amplified when associated to crisis episodes. (d) The time path of macroeconomic indicators around peaks in real GDP is more volatile in downturns associated with crisis compared to other downturns. (e) Financial cycles (credit and asset prices) tend to precede real output cycles. (f) Credit and stock prices are strongly pro-cyclical while real exchange rates, capital flows and terms of trade tend to be a-cyclical. Finally, an exploratory analysis on the conditional correlates of the cost of recessions shows that: (i) adverse terms of trade shocks raise the cost of recessions in countries with a more open trade regime and deeper financial markets. (ii) Recessions tend to be deeper if they coincide with a sudden stop, but the effect is smaller in countries with deeper domestic credit markets. (iii) Floating exchange rate regimes appear to act as shock absorbers.

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Paper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 371.

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Date of creation: 2011
Handle: RePEc:ioe:doctra:371
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  1. Mark Aguiar & Gita Gopinath, 2007. "Emerging Market Business Cycles: The Cycle Is the Trend," Journal of Political Economy, University of Chicago Press, vol. 115, pages 69-102.
  2. Zarnowitz, Victor & Ozyildirim, Ataman, 2006. "Time series decomposition and measurement of business cycles, trends and growth cycles," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1717-1739, October.
  3. Agenor, Pierre-Richard & McDermott, C John & Prasad, Eswar S, 2000. "Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts," World Bank Economic Review, World Bank Group, vol. 14(2), pages 251-285, May.
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