Emerging economy business cycles: Financial integration and terms of trade shocks

Rudrani Bhattacharya (), Ila Patnaik () and Madhavi Pundit
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Rudrani Bhattacharya: National Institute of Public Finance and Policy
Ila Patnaik: National Institute of Public Finance and Policy

Working Papers from National Institute of Public Finance and Policy

Abstract: This paper analyses the extent to which financial integration impacts the manner in which terms of trade affct business cycles in emerging economies. Using a small open economy model, we show that as capital account openness increases in an economy that faces trade shocks, business cycle volatility reduces. For an economy with limited financial openness, and a relatively open trade account, a model with exogenous terms of trade shocks is able to replicate the features of the business cycle.

Keywords: Macroeconomics; Real business cycles; Emerging market DSGE models; Volatility; Terms of trade; Financial integration (search for similar items in EconPapers)
JEL-codes: E32 F4 (search for similar items in EconPapers)
Pages: 25
Date: 2013-03
New Economics Papers: this item is included in nep-dge, nep-opm and nep-sea
Note: Working Paper 120, 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Working Paper: Emerging Economy Business Cycles: Financial Integration and Terms of Trade Shocks (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:npf:wpaper:13/120

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