Investment-specific shocks and real business cycles in emerging economies: Evidence from Brazil

Eurilton Araújo

Economic Modelling, 2012, vol. 29, issue 3, 671-678

Abstract: This paper investigates the role of the RBC (Real Business Cycle) model with investment-specific technology shocks in explaining business cycle fluctuations in Brazil. I consider the role of transitory and permanent components of neutral and investment-specific technology shocks. I fit the model to the data using Bayesian techniques to show that the investment-specific shocks are important sources of fluctuations in the estimated model. In fact, in the context of the model, investment-specific shocks can account for remarkable percentages of fluctuations in consumption growth, GDP growth, investment growth and trade balance to GDP ratio. Furthermore, I present simulation evidence showing that the RBC model cannot account for some important features of the data.

Keywords: Investment-specific shocks; Business cycles; Brazil; Fluctuations; DSGE models (search for similar items in EconPapers)
JEL-codes: C11 E32 F41 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:3:p:671-678

DOI: 10.1016/j.econmod.2012.01.009

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