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The Right Fit for the Wrong Reasons: Real Business Cycle in an Oil-dependent Economy

Miguel Santos ()

Latin American Journal of Economics-formerly Cuadernos de Economía, 2016, vol. 53, issue 1, 61-94

Abstract: Venezuela has an oil-dependent economy subject to large exogenous shocks and a rigid labor market. These features go straight to the heart of two weaknesses of real business cycle (RBC) theory widely reported in the literature: neither shocks are volatile enough nor real salaries sufficiently flexible as required by the RBC framework to replicate the behavior of the economy. We calibrate a basic RBC model and compare a set of relevant statistics from RBC-simulated time series with actual data for Venezuela and the benchmark case of the United States (1950-2008). Despite Venezuela being a heavily regulated economy, RBC-simulated series provide a good t, in particular with regard to labor markets.

Keywords: macroeconomics; RBC; oil shocks; labor markets; Venezuela (search for similar items in EconPapers)
JEL-codes: E10 E32 O47 O54 Q32 (search for similar items in EconPapers)
Date: 2016
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Working Paper: The Right Fit for the Wrong Reasons: Real Business Cycle in an Oil-Dependent Economy (2015) Downloads
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Latin American Journal of Economics-formerly Cuadernos de Economía is currently edited by Raimundo Soto

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