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Fluctuations in commodity prices are an important driver of business cycles in small emerging market economies (EMEs). This paper documents how these fluctuations correlate strongly with the business cycle in EMEs. A commodity sector is then embedded into a multi-country EMEs business cycle model where exogenous fluctuations in commodity prices follow a common dynamic factor structure and coexist with other driving forces. The estimated model assigns to commodity shocks 42 percent of the variance in income, of which a considerable part is linked to the common factor. A further amplification mechanism is a spillover effect from commodity prices to risk premia.
Corporate sectors in emerging markets have noticeably increased their reliance on foreign financing, presumably reflecting low global interest rates. The evidence also shows a rebalancing from bank loans towards bonds. To study these developments, this paper develops a dynamic open economy model where these modes of finance are determined endogenously. The model replicates the stylized facts ... (View publication)
This paper documents how informal employment in Mexico is countercyclical, lags the cycle and is negatively correlated to formal employment. This contributes to explaining why total employment in Mexico displays low cyclicality and variability over the business cycle when compared to Canada, a developed economy with a much smaller share of informal employment. To account for these empirical findi ... (View publication)
Financial crises in both emerging and developed economies have been character- ized by large output drops and spikes in unemployment and interest rates. To account for these stylized facts this paper builds a business cycle model where financial and la- bor market frictions interact as occasionally binding borrowing constraints and search frictions. The model is calibrated to a Sudden Stop-prone e ... (View publication)
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