On the Sources of Aggregate Fluctuations in Emerging Economies

Roberto Chang and Andrés Fernández Martin

No 15938, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Recent research on macroeconomic fluctuations in emerging economies has focused in two leading approaches: introducing a stochastic productivity trend, in addition to temporary productivity shocks; or allowing for foreign interest rate shocks coupled with financial frictions. This paper compares the two approaches empirically, and also evaluates a model that encompasses them, taking advantage of recent developments in the theory and implementation of Bayesian methods. The encompassing model assigns a significant role to interest rate shocks and financial frictions, but not to trend shocks, in generating and amplifying aggregate fluctuations. Formal model comparison exercises favor models with financial frictions over the stochastic trend model, although this is sensitive to the inclusion of measurement errors. Of the two financial frictions we consider, working capital versus spreads linked to expected future productivity, the latter emerges as key for a reasonable approximation to the data.

JEL-codes: E3 F4 (search for similar items in EconPapers)
Date: 2010-04
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Published as Roberto Chang & Andrés Fernández, 2013. "On The Sources Of Aggregate Fluctuations In Emerging Economies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 1265-1293, November.

Downloads: (external link)
http://www.nber.org/papers/w15938.pdf (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:nbr:nberwo:15938

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w15938

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().