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Title:Emerging market business cycles revisited: learning about the trend PDF Logo
Authors:Boz, Emine
Daude, Christian
Durdu, C. Bora
Issue Date:2011
Series/Report no.:TÜSİAD-Koç University Economic Research Forum working paper series 1110
Abstract:We build an equilibrium business cycle model in which agents cannot perfectly distinguish between the permanent and transitory components of TFP shocks and learn about those components using the Kalman filter. Calibrated to Mexico, the model predicts a higher variability of consumption relative to output and a strongly negative correlation between the trade balance and output for a wide range of variability and persistence of permanent shocks vis-a-vis the transitory shocks. Moreover, our estimation for Mexico and Canada suggests more severe informational frictions in emerging markets than in developed economies.
Subjects:emerging markets
business cycles
learning
Kalman filter
JEL:F41
E44
D82
Document Type:Working Paper
Appears in Collections:ERF Working Paper Series, TÜSİAD-Koç University Economic Research Forum (ERF)

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