Cover IMF Working Papers
Buy Book in Print
Emerging Market Business Cycles: The Role of Labor Market Frictions
Author:
Ms. Emine Boz
Search for other papers by Ms. Emine Boz in
Current site
Google Scholar Close
,
Ceyhun Bora Durdu null

Search for other papers by Ceyhun Bora Durdu in
Current site
Google Scholar Close
, and
Ms. Nan Li
Search for other papers by Ms. Nan Li in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 237
Language:
English
Publication Date:
02 Oct 2012
DOI:
https://doi.org/10.5089/9781475511208.001
ISBN:
9781475511208
ISSN:
1018-5941
Pages:
51
Keywords:
WP; labor market; unemployment rate; interest rate shock; emerging markets; labor markets; business cycles; search frictions; TFP shock; current account; job market; Wages; Consumption; Unemployment; Total factor productivity; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (4.4 MB) Download Epub
Emerging economies are characterized by higher consumption and real wage variability relative to output and a strongly countercyclical current account. A real business cycle model of a small open economy that embeds a Mortensen-Pissarides type of search-matching frictions and countercyclical interest rate shocks can jointly account for these regularities. In the face of countercyclical interest rate shocks, search-matching frictions increase future employment uncertainty, improving workers’ incentive to save and generating a greater response of consumption and the current account. Higher consumption response in turn feeds into larger fluctuations in the workers’ bargaining power while the interest rates shocks lead to variations in the firms’ willingness to hire; both of which contribute to a highly variable real wage.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund