The paper recognizes that expectations and the process of their formation are subject to standard decision making and are determined as a part of equilibrium. Accordingly, the paper presents a basic framework in which the form of expectation formation is a choice variable. At any point in time...

Extant estimates of the welfare cost of business cycles suggest that this cost is quite low and might well be minuscule. Those estimates are based on consumption data for the United States as a whole. The volatility of aggregate consumption, however, is much stronger at the state level. We argue...

How large are welfare costs related to economic aggregate fluctuations is a topic of great concern among economists at least since Robert Lucas’ well-known and thoughtprovoking exercise in the late 1980s. Our analysis assesses the magnitude of such costs for 11 countries in South America...

This paper uses the open economy structural VAR model developed in Buckle, Kim, Kirkham, McLellan and Sharma (2002) to evaluate the impact of monetary policy on New Zealand business cycles and inflation variability and the output/inflation variability trade-off. The model includes a...

This paper presents an empirical characterization of Uruguayan’s Business Cycle applying the Switching Regime methodology; three scenarios were considered: recession, moderate growth and boom. The relation between regional and Uruguayan’s business cycle is analyzed through the same...

We use a variety of techniques to examine the nature and degree of co-movement among Australian state business cycles. Our results indicate that these cycles move closely together, with particularly strong links between the cycles of the larger states. This finding is robust to a range of...

This paper examines the relationship of business cycles, the terms of trade and Tobin's q using a three-sector dynamic stochastic general equilibrium model for a small open economy. Results show that terms of trade shocks account for half of actual volatility of GDP and stock market indices for...

Firms in poor countries often tend to rely on alternative sources of financing different than banks. We show that borrowing constraints lead to financial arrangements between firms that can amplify the effect of liquidity or productivity shocks in the economy. In particular, we focus on the...

This paper investigates the determining factors in private capital flow, differentiating foreign direct investment (FDI) from other flows and emphasizing the role of financial liberalization and. Two reasons brought about this examination. The first is the substantial increase in private capital...

The present paper applies the Markov switching model with the aim of checking two industrial production features of six major Brazilian states. Firstly, we try to determine the date of business cycles and, soon afterwards, we verify the existence or not of an unobservable component that is...