The increase in global economic volatility due to the ongoing crisis in developed countries and its spillovers to the rest of the world has brought renewed relevance to external shocks as a source of business cycles in emerging market economies. This paper analyzes changes in the impact of...

We set up and estimate a DSGE model of a small open economy to assess the role of domestic financial frictions in propagating foreign shocks. In particular, the model features two types of financial frictions: one in the relationship between depositors and banks (following Gertler and Karadi,...

Despite sustained high levels of commodity prices, the current account balances of several commodity-exporting countries have deteriorated in recent years. This phenomenon is examined quantitatively using a small open economy model with a commodity-producing sector and the assumption that agents...