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Emerging Economy Business Cycles: Financial Integration and Terms of Trade Shocks
Author:
Rudrani Bhattacharya null

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Ila Patnaik null

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Madhavi Pundit null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2013: Issue 119
Language:
English
Publication Date:
22 May 2013
DOI:
https://doi.org/10.5089/9781484354605.001
ISBN:
9781484354605
ISSN:
1018-5941
Pages:
26
Keywords:
WP; Macroeconomics; real business cycles; emerging market DSGE models; volatility; terms of trade; terms of trade shock; business cycle volatility; terms of trade fluctuation; terms of trade volatility; net barter terms of trade; volatility decrease; tot shock; current account volatility; a number of emerging economies; Financial integration; Trade balance; Business cycles; Current account; Africa; East Asia; 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.
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This paper analyses the extent to which financial integration impacts the manner in which terms of trade affect business cycles in emerging economies. Using a s mall 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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund