Emerging Economy Business Cycles: Financial Integration and Terms of Trade Shocks
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Summary:
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.
Series:
Working Paper No. 2013/119
Subject:
Balance of payments Business cycles Current account Economic growth Financial integration Financial markets International trade Terms of trade Trade balance
English
Publication Date:
May 22, 2013
ISBN/ISSN:
9781484354605/1018-5941
Stock No:
WPIEA2013119
Pages:
26
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