American Economic Review: Vol. 100 No. 5 (December 2010)


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Real Business Cycles in Emerging Countries?

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García-Cicco, Javier, Roberto Pancrazi, and Martín Uribe. 2010. "Real Business Cycles in Emerging Countries?" American Economic Review, 100(5): 2510-31.

DOI: 10.1257/aer.100.5.2510


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)

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García-Cicco, Javier (Central Bank of Chile)
Pancrazi, Roberto (Duke U)
Uribe, Martín (Columbia U)

JEL Classifications

E13: General Aggregative Models: Neoclassical
E32: Business Fluctuations; Cycles
E44: Financial Markets and the Macroeconomy
F43: Economic Growth of Open Economies
O11: Macroeconomic Analyses of Economic Development
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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