Emerging Economy Business Cycles: Financial Integration and Terms of Trade Shocks

Rudrani Bhattacharya, Ila Patnaik and Madhavi Pundit

No 2013/119, IMF Working Papers from International Monetary Fund

Abstract: This paper analyses the extent to which financial integration impacts the manner in which terms of trade affect business cycles in emerging economies. Using a s mall open economy model, we show that as capital account openness increases in an economy that faces trade shocks, business cycle volatility reduces. For an economy with limited financial openness, and a relatively open trade account, a model with exogenous terms of trade shocks is able to replicate the features of the business cycle.

Keywords: WP; Macroeconomics; real business cycles; emerging market DSGE models; volatility; terms of trade; terms of trade shock; business cycle volatility; terms of trade fluctuation; terms of trade volatility; net barter terms of trade; volatility decrease; tot shock; current account volatility; a number of emerging economies; Financial integration; Trade balance; Business cycles; Current account; Africa; East Asia; Global (search for similar items in EconPapers)
Pages: 26
Date: 2013-05-22
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=40558 (application/pdf)

Related works:
Working Paper: Emerging economy business cycles: Financial integration and terms of trade shocks (2013)
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:imf:imfwpa:2013/119

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().