Department of Economics and Business Economics

Real business cycles in emerging economies: The role of international growth and interest rate

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

  • F. Venegas-Martínez, Escuela Superior de Economía del Instituto Politécnico Nacional (ES-IPN)
  • ,
  • Raúl O. Fernández, Banco de México (Banxico), Argentina
  • J. Eduardo Vera-Valdés, Denmark
This paper is aimed at developing a business-cycle model for a small open emerging economy (SOEE). The model is parameterized, calibrated, and simulated to rationalize two important stylized facts in a SOEE. The first one is that when the international interest rate increases, the growth rate of a SOEE is reduced. Secondly, when industrialized countries are in recession, a SOEE suffers an even larger reduction in their growth rate. The obtained results show that if exports respond negatively to the international interest rate or exports are reduced due to an international recession, the aggregated consumption of the domestic economy is substantially more volatile than an economy where exports do not react. Moreover, this paper provides a possible explanation to the puzzle that developing countries suffer a recession not only when industrialized countries are in recession, but also when they are growing too fast.
Original languageEnglish
JournalInvestigacion Economica
Volume71
Issue279
Pages (from-to)125-148
Number of pages24
ISSN0185-1667
Publication statusPublished - 1 Jan 2012

    Research areas

  • RBC, Emerging Economies, DSGE, Exports, Real Interest Rate

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