The Anatomy of Emerging-Market Business Cycles: Global Financial Shocks and Supply-Like Transmission

Luca Gambetti, Ivan Petrella, Alessandro Pollastri and Emiliano Santoro

No 21536, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We investigate the business-cycle anatomy of emerging and developing economies (EMDEs) and find that their dominant cyclical shock is global in origin but supply-like in transmission. The shock is closely related to global risk conditions and movements in export and import prices. It generates broad expansions, raises total factor productivity, and does not increase inflation. Yet its footprint is concentrated at business-cycle rather than low frequencies, so the productivity-like behavior of EMDE cycles is not evidence that the dominant shock is a primitive technology or trend shock. We rationalize the evidence through a mechanism that links global financial easing to cross-firm reallocation: lower working-capital costs benefit more productive firms disproportionately, shift resources toward them, generate procyclical total factor productivity, and amplify aggregate activity. The results identify a supply-side channel of global-financial-cycle transmission in EMDEs.

Keywords: Emerging markets; Business cycles; Global financial cycle; Financial frictions; Misallocation (search for similar items in EconPapers)
JEL-codes: E32 E44 F41 F44 (search for similar items in EconPapers)
Date: 2026-05
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP21536 (application/pdf)

Related works:
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:cpr:ceprdp:21536

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP21536

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().