This paper examines credit origins of the business cycle in the former Czechoslovakia. Industrial production is found to be cointegrated with various measures of bank credit during 1976-90 and it is shown that noninvestment credits are Granger-causing industrial production and that a feedback...

Emerging markets business cycle models treat default risk as part of an exogenous interest rate on working capital, while sovereign default models treat income fluctuations as an exogenous endowment process with ad-noc default costs. We propose instead a general equilibrium model of both...

This paper reviews the ""Austrian"" theory of the business cycle first proposed by Friedrich Hayek in the 1920s. His theory claimed that credit creation by monetary authorities would push investment beyond society''s long-term willingness to save, creating a mismatch between supply and demand...

Empirical research has been conducted on the various theories of the business cycle over many countries. However, very little research has attempted to undertake a multi-country disaggregate investigation into the sources of output change. This paper decomposes fluctuations in industry output in...

This paper shows that labor market search frictions do not explain fluctuations in the labor wedge per se. However, the introduction of extensive and intensive margin clarifies that measuring the MRS in terms of total hours artificially introduces procyclicality in the MRS. When the MRS is...

This paper assesses the extent to which Sub-Saharan Africa (SSA)’s business cycle is synchronized with that of the rest of the world (RoW). Findings suggest that SSA’s business cycle has not only moved in the same direction as that of the RoW, but has also gradually drifted away from the G7...

The paper investigates asymmetry in the allocation of aggregate demand shocks between real output growth and price inflation over the business cycle in a sample of fifteen Caribbean countries. In most countries, the evidence indicates the existence of structural constraints, implying that...

This paper develops and estimates a general equilibrium rational expectations model with search and multiple equilibria where aggregate shocks have a permanent effect on the unemployment rate. If agents' wealth decreases, the unemployment rate increases for a potentially indefinite period. This...