Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/102138
Authors: 
Born, Benjamin
Pfeifer, Johannes
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4793
Abstract: 
Jesús Fernández-Villaverde, Pablo A. Guerrón-Quintana, Juan F. Rubio-Ramírez and Martín Uribe (2011) find that risk shocks are an important factor in explaining emerging market business cycles. We show that their model needs to be recalibrated because it underpredicts the targeted business cycle moments by a factor of three once a time aggregation error is corrected. Recalibrating the corrected model for the benchmark case of Argentina, the peak response of output after an interest rate risk shock increases by 63 percent and the contribution of interest rate risk shocks to business cycle volatility more than doubles. Hence, risk matters more in the recalibrated model. However, the recalibrated model does worse in capturing the business cycle properties of net exports once an additional error in the computation of net exports is corrected.
Subjects: 
interest rate risk
stochastic volatility
JEL: 
E32
E43
F32
F44
Document Type: 
Working Paper

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