@conference {16257,
	title = {Emerging Market Fluctuations: The Role of Interest Rates and Productivity Shocks},
	booktitle = {Tenth Annual Conference on the Central Bank of Chile, "Current Account and External Financing"},
	year = {2006},
	note = {Bibtex},
	month = {9-10 Nov 2006},
	publisher = {Central Bank of Chile},
	organization = {Central Bank of Chile},
	address = {Santiago, Chile},
	abstract = {In this paper we use a quantitative model to explore the potential frictions that\&nbsp;distinguish emerging market business cycles from developed small open economies. Following Aguiar and Gopinath (2007) we allow total factor productivity (TFP) to have a\&nbsp;stationary and an integrated component. We also allow for shocks to the consumption\&nbsp;and investment Euler Equations that operate through the interest rate. These {\textquotedblleft}wedges{\textquotedblright}\&nbsp;represent changes in the intertemporal marginal rate of transformation, which may be\&nbsp;due to changes in observed interest rates, unobserved borrowing constraints, or other\&nbsp;financial frictions. We estimate the model using data from Mexico and Canada. We\&nbsp;show that interest rate shocks orthogonal to domestic TFP fail to explain the behavior of emerging markets. We then allow for interest rates to respond to/co-vary with\&nbsp;productivity shocks. We find that emerging market business cycles appear to be driven\&nbsp;by large shocks to trend income combined with relatively small transitory shocks that\&nbsp;co-vary with the interest rate.},
	author = {Mark Aguiar and Gita Gopinath}
}
