Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/71987 
Year of Publication: 
2005
Series/Report no.: 
Working Paper No. 522
Publisher: 
The Johns Hopkins University, Department of Economics, Baltimore, MD
Abstract: 
Existing results on the contribution of terms of trade and world interest rate shocks to output fluctuations in small open economies range from less than 10% to almost 90%. We argue that an identification problems lies at the heart of these vastly di¤erent results. In this paper, we overcome this by estimating a DSGE model using a structural Bayesian estimation approach. We apply our methodology to five developed and developing economies.. Our approach allows us to e?ciently exploit cross-equation restrictions implied by the structural model. We find that world interest rate shocks are the main driving forces of business cycles in small open economies while terms of trade shocks are not.
Subjects: 
World Shocks
Business Cycles
Small Open Economy Model
Structural Estimation
Bayesian Analysis
JEL: 
C32
F41
Document Type: 
Working Paper

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