Testing Real Business Cycle Models in an Emerging Economy

Raimundo Soto and Raphael Bergoeing

No 219, Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile.

Abstract: RBC models have been successful when applied to developed economies: their abilities in replicating the data of emerging countries remain largely unexplored. The rapid but unstable growth process in developing countries and their relatively less developed market structure pose a formidable challenge to neoclassical general equilibrium models. Using data of the Chilean economy, we explore the effects of market rigidities and macroeconomic policies on the dynamics of consumption, investment, inflation and factor markets. We find that business cycles models replicate much of the observed fluctuations of real and monetary variables in the Chilean economy, despite its idiosyncratic economic structure. Using a calibrated model we find that technology shocks, fiscal policies and labor market rigidities are the main sources of economic cycles, while monetary policies and wage indexation play a minor role. Econometric tests support the use of our calibrated model as an adequate representation of the Chilean data.

Keywords: General equilibrium models; emerging economies; testing (search for similar items in EconPapers)
JEL-codes: D58 E32 E60 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (19)

Published as "Testing Real Business Cycle Models in an Emerging Economy", en "General Equilibrium Models for the Chilean Economy". Editado por R. Chumacero and K. Schmidt-Hebbel, Banco Central de Chile, 2005.

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https://www.economia.uc.cl/docs/doctra/dt-219.pdf (application/pdf)

Related works:
Chapter: Testing Real Business Cycle Models in a Emerging Economy (2005)
Working Paper: Testing Real Business Cycles Models in an Emerging Economy (2002)
Working Paper: Testing Real Business Cycle Models in an Emerging Economy (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ioe:doctra:219

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