Real Business Cycles in Emerging Economies The Role of International Growth and Interest Rate

Abstract

This paper develops a dynamic stochastic general equilibrium model (DSGE) for a small open emerging economy (SOEE) where the interest rate is decomposed into an international rate and a country risk component. We show that if exports respond negatively to the international interest rate or to an international recession, the aggregated consumption of the domestic economy is substantially more volatile than an economy where exports do not react. In other words, this paper finds a coherent explanation to the riddle when either industrialized countries are growing too fast or face a recession, developing countries suffer.

Download

The version of record can be freely (golden access) downloaded here.

Recommended citation

Text

Fernández, R., Vera-Valdés, J.E., and Venegas-Martínez, F. (2012). “Real Business Cycles in Emerging Economies The Role of International Growth and Interest Rate.” Investigacion Economica. 71(279). http://www.jstor.org/stable/42779223

BibTex

@article{VERAVALDES2011b,
 ISSN = {01851667},
 URL = {http://www.jstor.org/stable/42779223},
 author = {Fernández, R., and J.E. Vera-Valdés, and Venegas-Martínez, F.},
 journal = {Investigación Económica},
 number = {279},
 pages = {125--148},
 title = {Real Business Cycles in Emerging Economies: The Role of International Growth and Interest Rate},
 volume = {71},
 year = {2012}
}