NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Medium Term Business Cycles in Developing Countries

Diego A. Comin, Norman Loayza, Farooq Pasha, Luis Serven

NBER Working Paper No. 15428
Issued in October 2009
NBER Program(s):   EFG   IFM   ITI   PR

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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This paper was revised on December 5, 2011

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Document Object Identifier (DOI): 10.3386/w15428

Published: 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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