Characterizing Business Cycles in Small Economies
This paper aims to document a set of stylized facts characterizing business cycle dynamics in smaller economies. The paper uses a large sample of countries spanning 1960-2014 to show that country size is a significant factor affecting countries...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/556931531406770669/Characterizing-business-cycles-in-small-economies http://hdl.handle.net/10986/30000 |
| Summary: | This paper aims to document a set of
stylized facts characterizing business cycle dynamics in
smaller economies. The paper uses a large sample of
countries spanning 1960-2014 to show that country size is a
significant factor affecting countries' volatility,
comovement with gross domestic product and real interest
rate, and persistence. Specifically, analysis finds that
smaller countries (i) tend to have more volatile gross
domestic product; (ii) have more volatile, less procyclical,
and less persistent investment; (iii) exhibit more volatile
trade balance and current account, have more procyclical
exports, and thus less countercyclical trade balance; (iv)
have more volatile government consumption and more
procyclical public revenues and fiscal balance; and (v)
possess more procyclical inflation. The effects of country
size remain robust even after we control for the level of
economic and institutional development, the presence of
fiscal rule(s) and fixed exchange rates, and the commodity
exporting status. |
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