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Testing Real Business Cycle Models in a Emerging Economy

In: General Equilibrium Models for the Chilean Economy

Author

Listed:
  • Raphael Bergoeing

    (Universidad de Chile)

  • Raimundo Soto

    (Pontificia Universidad Católica de Chile)

Abstract
RBC models have been successfull when applied to developed economies: their abilities in replicating the data of emerging countries remain largely unexplored. The rapid but unstable growth process in developing countries and their relatively less developed market structure pose a formidable challenge to neoclessical general equilibrium models. Using data of the Chilean economy, we explore the effect of market rigidities and macroeconomic policies on the dynamics of consumption, investment, inflation and factor markets. We find that business cycles models replicate much of the observed fluctuations of real and monetary variables in the Chilean economy, depite its idiosyncratic economic structure. Using a calibrated model we find that technology shocks, fiscal policies and labor market rigidities are the main sources of economic cycles, while monetary policies and wage indexation play a minor role. Econometric tests support the use of our calibrated model as an adequate representation of the Chilean data.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Raphael Bergoeing & Raimundo Soto, 2005. "Testing Real Business Cycle Models in a Emerging Economy," Central Banking, Analysis, and Economic Policies Book Series, in: Rómulo A. Chumacero & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.),General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 7, pages 221-260, Central Bank of Chile.
    • Handle: RePEc:chb:bcchsb:v09c07pp221-260
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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