Real Business Cycles in Emerging Countries?

Download or read book Real Business Cycles in Emerging Countries? written by Javier Garcia-Cicco and published by . This book was released on 2006 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use more than one 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 at 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.