Cover IMF Working Papers
Business Cycles in Emerging Markets: The Role of Durable Goods and Financial Frictions
Author: International Monetary Fund
Series:
IMF Working Papers
Volume/Issue:
Volume 2011: Issue 133
Language:
English
Publication Date:
01 Jun 2011
DOI:
https://0-doi-org.library.svsu.edu/10.5089/9781455259380.001
ISBN:
9781455259380
ISSN:
1018-5941
Pages:
38
Keywords:
WP; consumer durables; trade balance; emerging markets; real business cycles; durables; financial frictions; durable goods; borrowing premium; consumption goods; consumption expenditure; utility share; open economy; Consumption; Emerging and frontier financial markets; Business cycles; Income
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper examines how durable goods and financial frictions shape the business cycle of a small open economy subject to shocks to trend and transitory shocks. In the data, nondurable consumption is not as volatile as income for both developed and emerging market economies. The simulation of the model implies that shocks to trend play a less important role than previously documented. Financial frictions improve the ability of the model to match some key business cycle properties of emerging economies. A countercyclical borrowing premium interacts with the nature of durable goods delivering highly volatile consumption and very countercyclical net exports.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund