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Emerging market fluctuations : what makes the difference ?

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  • Hevia, Constantino

Abstract

Aggregate fluctuations in emerging countries are quantitatively larger and qualitatively different in key respects from those in developed countries. Using data from Mexico and Canada, this paper decomposes these differences in terms of shocks to aggregate efficiency and shocks that distort the decisions of households about how much to invest, consume, and work in a standard model of a small open economy. The decomposition exercise suggests that most of these differences are explained by fluctuations in aggregate efficiency, distortions in labor decisions over the business cycle, and, most importantly, fluctuations in country risk. Other distortions are quantitatively less important.

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  • Hevia, Constantino, 2009. "Emerging market fluctuations : what makes the difference ?," Policy Research Working Paper Series 4897, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4897
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    References listed on IDEAS

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    Cited by:

    1. Jacek Rothert & Mohammad Rahmati, 2014. "Business Cycle Accounting in a Small Open Economy," Departmental Working Papers 46, United States Naval Academy Department of Economics.
    2. Roberto Duncan, 2015. "Simple Models to Understand and Teach Business Cycle Macroeconomics for Emerging Market and Developing Economies," Working Papers 2015-49, Peruvian Economic Association.
    3. Hakon Tretvoll & Fernando Leibovici & David Kohn, 2017. "Trade in Commodities and Emerging Market Business Cycles," 2017 Meeting Papers 743, Society for Economic Dynamics.

    More about this item

    Keywords

    Economic Theory&Research; Political Economy; Emerging Markets; Currencies and Exchange Rates; Investment and Investment Climate;

    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

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