"Tropical" Real Business Cycles? A Bayesian Exploration

Andrés Fernández Martin

No 9248, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: Can frictionless small open economy models driven solely by technology shocksaccount for business cycles in developing countries? We don't find evidence of it. We build a DSGE model that jointly includes a variety of real perturbations in addition to technology shocks, such as procyclical fiscal policies; terms of trade fluctuations; and perturbations to the foreign interest rate coupled with financial frictions and estimate it using Bayesian methods on high and low frequency data from a developing -and "tropical"- country, Colombia. We find interest rate shocks to be crucial andthat financial frictions play a central role as propagating mechanisms of transitory technology shocks. These two driving forces alone can account well for the observed properties of the Colombian business cycle. Other structural shocks such as terms of trade fluctuations and level shifts in the technology process do not appear to be relevant in the past decade and a half, but their importance increases when a longer span of data is considered.

Keywords: Business cycles; developing economies; dynamic stochastic generalequilibrium models; small open economy models; Bayesian estimation. (search for similar items in EconPapers)
JEL-codes: C11 E32 F41 F47 (search for similar items in EconPapers)
Pages: 42
Date: 2011-09-06
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repositorio.uniandes.edu.co/bitstream/handle/1992/8281/dcede2011-41.pdf

Related works:
Journal Article: “Tropical” Real Business Cycles? A Bayesian Exploration (2010)
Journal Article: “TROPICAL” REAL BUSINESS CYCLES? A BAYESIAN EXPLORATION (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:col:000089:009248

Access Statistics for this paper

More papers in Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE Contact information at EDIRC.
Bibliographic data for series maintained by Universidad De Los Andes-Cede ().