Real Business Cycles in Emerging Countries?
Open Access
- 1 December 2010
- journal article
- Published by American Economic Association in American Economic Review
- Vol. 100 (5), 2510-2531
- https://doi.org/10.1257/aer.100.5.2510
Abstract
We use more than a century of Argentine and Mexican data to estimate the structural parameters of a small-open-economy real-business-cycle model driven by nonstationary productivity shocks. We find that the RBC model does a poor job of explaining business cycles in emerging countries. We then estimate an augmented model that incorporates shocks to the country premium and financial frictions. We find that the estimated financial-friction model provides a remarkably good account of business cycles in emerging markets and, importantly, assigns a negligible role to nonstationary productivity shocks. (JEL E13, E32, E44, F43, O11, O16)Keywords
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