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From 1960-2009, the U.S. current account balance has tended to decline during expansions and improve in recessions. We argue that trend shocks to productivity can help explain the countercyclical U.S. current account. Our framework is a two-country, two-good real business cycle (RBC) model in...
Persistent link: https://www.econbiz.de/10011108185
We estimate how monetary policy works in small open economies. To do so, we build a dynamic stochastic general equilibrium model that incorporates the basic features of these economies. We conclude that the monetary policy in a group of small open economies (including Australia, Chile, Colombia,...
Persistent link: https://www.econbiz.de/10008465962
Can frictionless small open economy models drivensolely by technology shocks account for businesscycles in developing countries? We do not find evidenceof it. We build a DSGE model that jointly includesa variety of real perturbations in addition totechnology shocks, such as procyclical fiscal...
Persistent link: https://www.econbiz.de/10009003248
This paper examines the ability of vector autoregressive (VAR) models to properly identify the transmission of monetary policy in a controlled experiment. Simulating data from an estimated small open economy DSGE model for Australia, we find that sign-restricted VAR models do reasonably well at...
Persistent link: https://www.econbiz.de/10010611072
This paper examines the ability of vector autoregressive (VAR) models to properly identify the transmission of monetary policy in a controlled experiment. Simulating data from a small open economy DSGE model estimated for Australia, we find that sign-restricted VAR models do reasonably well at...
Persistent link: https://www.econbiz.de/10011048458
Existing studies differ significantly on how much terms of trade shocks contribute to output fluctuations. Empirical studies based on VAR analysis find that terms of trade shocks explain less than 10% of output fluctuations while results from calibrated DSGE models suggest a figure of more than...
Persistent link: https://www.econbiz.de/10005706321
Countercyclical country interest rates have been shown to be both a distinctive characteristic and an important driving force of business cycles in emerging market economies. In order to account for this, most business cycle models of emerging market economies have relied on ad hoc and exogenous...
Persistent link: https://www.econbiz.de/10010945109
Aggregate fluctuations in emerging countries are different from those in developed countries. Using data from Mexico and Canada, this paper decomposes these differences in terms of reduced form shocks that affect aggregate efficiency and distort the decisions of households about how much to...
Persistent link: https://www.econbiz.de/10010931447
Current account crises in emerging markets are characterized by large increases in interest rates, big drops in output, and large real currency depreciations. Current models of crisis with financial frictions do not generate very large movements in these variables. Recent work has shown that the...
Persistent link: https://www.econbiz.de/10005342997
Financial crises in emerging economies are accompanied by a large fall in total factor productivity. We explore the role of financial frictions in exacerbating the misallocation of resources and explaining this drop in TFP. We build a two-sector model of a small open economy with a working...
Persistent link: https://www.econbiz.de/10010538926