Emerging Market Business Cycles: The Cycle is the Trend

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Emerging Market Business Cycles: The Cycle is the Trend

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Title: Emerging Market Business Cycles: The Cycle is the Trend
Author: Aguiar, Mark; Gopinath, Gita

Note: Order does not necessarily reflect citation order of authors.

Citation: Aguiar, Mark, and Gita Gopinath. 2007. Emerging market business cycles: The cycle is the trend. Journal of Political Economy 115(1): 69-102.
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Abstract: Emerging market business cycles exhibit strongly countercyclical current accounts, consumption volatility that exceeds income volatility, and “sudden stops” in capital inflows. These features contrast with developed small open economies. Nevertheless, we show that a standard model characterizes both types of markets. Motivated by the frequent policy regime switches observed in emerging markets, our premise is that these economies are subject to substantial volatility in trend growth. Our methodology exploits the information in consumption and net exports to identify the persistence of productivity. We find that shocks to trend growth—rather than transitory fluctuations around a stable trend—are the primary source of fluctuations in emerging markets. The key features of emerging market business cycles are then shown to be consistent with this underlying income process in an otherwise standard equilibrium model.
Published Version: http://dx.doi.org/10.1086/511283
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:11988098
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