Emerging Economy Business Cycles: Financial Integration and Terms of Trade Shocks
May 22, 2013
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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.
Subject: Balance of payments, Business cycles, Current account, Economic growth, Financial integration, Financial markets, International trade, Terms of trade, Trade balance
Keywords: a number of emerging economies, Africa, business cycle volatility, Business cycles, Current account, current account volatility, East Asia, emerging market DSGE models, Financial integration, Global, Macroeconomics, net barter terms of trade, real business cycles, terms of trade, terms of trade fluctuation, terms of trade shock, terms of trade volatility, tot shock, Trade balance, volatility, volatility decrease, WP
Pages:
26
Volume:
2013
DOI:
Issue:
119
Series:
Working Paper No. 2013/119
Stock No:
WPIEA2013119
ISBN:
9781484354605
ISSN:
1018-5941
