Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/217340 
Year of Publication: 
2019
Citation: 
[Journal:] Central Bank Review (CBR) [ISSN:] 1303-0701 [Volume:] 19 [Issue:] 4 [Publisher:] Elsevier [Place:] Amsterdam [Year:] 2019 [Pages:] 115-127
Publisher: 
Elsevier, Amsterdam
Abstract: 
This paper shows that the strong countercyclicality of net exports observed in emerging market economies can be explained to a large extent by the use of imported inputs in production. We build a single-sector small open economy business cycle model featuring imported inputs and variable capital utilization in production, and a working capital constraint. The model yields countercyclical net exports and realistic business cycle dynamics. The magnitude of the countercyclicality of net exports increases with the share of imported inputs. The elasticity of substitution between domestic and imported inputs is also critical in obtaining this result. The model also attributes an important role to import prices in matching the business cycle facts in emerging markets.
Subjects: 
Business cycles
Emerging markets
Imported inputs
Countercyclical net exports
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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