Medium term business cycles in developing countries
By: Diego Comin, Norman Loayza, Farooq Pasha, Luis Serven
Contributors: Harvard Business School
Series: Working paper / Harvard Business School -- 10-029; Working paper (Harvard Business School) -- 10-029.
Publisher: Harvard Business School
Published: 2009
Place of publication: [Boston]
Language: eng
Number of pages: 39
Description: We build a two country asymmetric DSGE model with two features: (i) a product cycle structure determines the range of intermediate goods used to produce new capital in each country and (ii) there are investment flow adjustment costs in the developing economy. We calibrate the model to match the Mexico-US trade and FDI flows. The model is able to explain (i) why US shocks have a larger effect on Mexico than in the US and hence why the Mexican economy is more volatile than the US; (ii) why US business cycles lead over medium term fluctuations in Mexico and (iii) why Mexican consumption is not less volatile than output.
Notes: "October 2009"--Publisher's website.

Includes bibliographical references.