Medium Term Business Cycles in Developing Countries
We build a two country asymmetric DSGE model with two features: (i) endogenous and slow diffusion of technologies from the developed to the developing country, and (ii) adjustment costs to investment flows. We calibrate the model to match the Mexico-U.S. trade and FDI flows. The model is able to explain the following stylized facts: (i) U.S. and Mexican output co-move more than consumption; (ii) U.S. shocks have a larger e¤ect on Mexico than in the U.S.; (iii) U.S. business cycles lead over medium term fluctuations in Mexico; (iv) Mexican consumption is more volatile than output.
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Copy CitationDiego A. Comin, Norman Loayza, Farooq Pasha, and Luis Serven, "Medium Term Business Cycles in Developing Countries," NBER Working Paper 15428 (2009), https://doi.org/10.3386/w15428.
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Published Versions
Diego Comin & Norman Loayza & Farooq Pasha & Luis Serven, 2014. "Medium Term Business Cycles in Developing Countries," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(4), pages 209-45, October. citation courtesy of 
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