current account to a country-specific transitory shock is too large, and (ii) the fluctuations in the current account are …

frictions for business cycle volatility. In our empirical analysis, we demonstrate that stylised facts suggest that countries … with more developed financial systems have lower business cycle volatility. Financial openness has no strong impact on … business cycle volatility, in contrast. In our theoretical analysis, we use a dynamic general equilibrium model to study the …

(productivity shocks) and external shocks to terms of trade and the foreign demand. A comparison of the volatility of the … in terms of their implied volatility for the considered macroeconomic variables. A two-country version of the Calvo …) inflation, but still allow high volatility in the nominal exchange rate to stabilize the real economy in face of shocks. The low …