According to Lucas (1981) understanding business cycles is the first step in designing appropriate stabilization policies. In this paper, we demonstrate a series of ways in which developing countries differ from their developed counterparts when focus is on the nature and characteristics of...

Why is GDP so much more volatile in poor countries than in rich ones? To answer this question, we propose a theory of technological diversification. Production makes use of different input varieties, which are subject to imperfectly correlated shocks. As in endogenous growth models,...

Why is GDP so much more volatile in poor countries than in rich ones? To answer this question, we propose a theory of technological diversification. Production makes use of different input varieties, which are subject to imperfectly correlated shocks. As in endogenous growth models,...

This paper demonstrates that developing countries differ considerably from their developed counterparts when focus is on the nature and characteristics of short-run macroeconomic fluctuations. Cycles are generally shorter, and the stylized facts of business cycles across countries are more...