Characterizing the Business Cycles of Emerging Economies

Using the dating algorithm by Harding and Pagan (2002) on a quarterly database for 23 emerging market economies (EMEs) and 12 developed countries over the period 1980.Q1 - 2006.Q2, the authors proceed to characterize and compare the business cycle...

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Bibliographic Details
Main Authors:	Calderón, Cesar, Fuentes, Rodrigo
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCOUNTING ADJUSTMENT COSTS ADVERSE REAL SHOCKS AUDIT COMMITTEE BANK POLICY BANKING CRISIS BANKRUPTCY BANKRUPTCY LAWS BANKRUPTCY PROCEDURES BILL BUSINESS CYCLE BUSINESS CYCLES BUSINESS REGULATIONS CAPITAL ACCOUNT CAPITAL FLOWS CAPITAL INFLOWS CAPITAL MARKET CAPITAL MARKET DEVELOPMENT CENTRAL BANK CLAIMANTS COLLATERAL COMMODITY COMMODITY PRICES CONTRACT ENFORCEMENT CONTROL VARIABLES COUNTRY RISK CREDIT CONSTRAINTS CREDIT HISTORIES CREDIT INFORMATION CREDIT INFORMATION REGISTRIES CREDIT MARKET CREDIT MARKETS CREDIT RATINGS CREDITORS CURRENCY CURRENCY CRISIS CURRENCY OVERVALUATION CURRENT ACCOUNT CURRENT ACCOUNT BALANCES CYCLICAL FLUCTUATIONS CYCLICAL SHOCKS DEBT DEBT CRISIS DEBTORS DEPENDENT VARIABLE DEPOSIT DEPOSIT MONEY BANKS DEPRECIATION DERIVATIVE DESCRIPTIVE STATISTICS DEVELOPING COUNTRIES DEVELOPING ECONOMIES DISTORTIONS DOMESTIC CREDIT DOMESTIC CURRENCY DOMESTIC ECONOMY DOMESTIC FINANCIAL MARKET DOMESTIC FINANCIAL MARKETS DOMESTIC FINANCIAL SYSTEM DUMMY VARIABLE DUMMY VARIABLES ECONOMIC CRISIS ECONOMIC GROWTH ECONOMIC POLICIES ECONOMIC REFORMS EMERGING ECONOMIES EMERGING MARKET EMERGING MARKET COUNTRIES EMERGING MARKET ECONOMIES EMERGING MARKET ECONOMY EMERGING MARKETS EXCHANGE RATE EXCHANGE RATE ARRANGEMENTS EXCHANGE RATE REGIME EXCHANGE RATE REGIMES EXCHANGE RATES EXOGENOUS SHOCKS EXPANSIONARY PHASE EXPANSIONARY PHASES EXPLANATORY VARIABLE EXPLANATORY VARIABLES EXPROPRIATION EXTERNAL DEMAND EXTERNAL FACTORS EXTERNAL SHOCKS FACTOR MARKETS FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL DEVELOPMENT FINANCIAL FLOWS FINANCIAL INFORMATION FINANCIAL INSTITUTIONS FINANCIAL INTEGRATION FINANCIAL MARKETS FINANCIAL OPENNESS FINANCIAL SHOCKS FINANCIAL SYSTEM FIXED EXCHANGE RATE FIXED EXCHANGE RATE REGIMES FLEXIBLE EXCHANGE RATE FLEXIBLE EXCHANGE RATE REGIMES FLEXIBLE EXCHANGE RATES FLEXIBLE RATES FLOATING EXCHANGE RATE FLOATING EXCHANGE RATE REGIMES FORECLOSURE FOREIGN INTEREST FOREIGN INTEREST RATE FOREIGN INTEREST RATES GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GENERAL EQUILIBRIUM MODELS GLOBAL LIQUIDITY GLOBALIZATION GOVERNMENT POLICY GROSS DOMESTIC PRODUCT GROSS NATIONAL INCOME GROWTH RATES IMBALANCES INDUSTRIAL COUNTRIES INFLATION INFLATION RATE INSURANCE INTEREST RATE INTEREST RATE CAPS INTEREST RATE SHOCKS INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL MARKETS INTERNATIONAL FINANCIAL STATISTICS INTERNATIONAL MARKETS INTERNATIONAL TRADE INVESTMENT FLOW JUDICIAL PROCESS LABOR MARKET LABOR MARKETS LEGAL PROTECTION LEGAL RIGHT LEGAL RIGHTS LEGAL SYSTEMS LENDERS LESS DEVELOPED ECONOMIES LEVY LIQUID ASSETS LIQUIDITY LIQUIDITY CONDITIONS LOCAL CURRENCY MACROECONOMIC FLUCTUATIONS MACROECONOMIC INSTABILITY MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMIC STABILITY MACROECONOMIC VOLATILITY MONETARY ECONOMICS MONEY MARKET MONEY MARKET RATE NATURAL DISASTERS NEGATIVE SHOCKS NOTARIES OPEN ECONOMIES OPEN ECONOMY OPTIMUM CURRENCY AREA OUTPUT OUTPUT LOSS OUTPUT LOSSES OUTPUTS PERMANENT INCOME HYPOTHESIS POLITICAL ECONOMY POLITICAL RISK POTENTIAL INVESTORS PRIVATE CREDIT PUBLIC REGISTRIES RANDOM WALK REAL EXCHANGE RATE REAL EXCHANGE RATE OVERVALUATION REAL INTEREST REAL INTEREST RATES REAL MONEY MARKET RATE REAL SHOCKS RECESSION RECESSIONS REGRESSION ANALYSIS REGULATORY FRAMEWORK RESERVE BANK RISK PREMIUM RISK SHARING SAVINGS SCATTER PLOTS SHAREHOLDERS SLOWDOWN SLOWDOWNS SMALL BUSINESSES STANDARD DEVIATION STEADY STATE SUPPLY SHOCK TAX TRADE DEFICIT TRADE OPENNESS TRADE POLICY TRADE REGIME TRADE SHOCK TRADE SHOCKS VALUATION WORKING CAPITAL WORLD ECONOMY WORLD INTEREST RATES
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100622100448 http://hdl.handle.net/10986/3829

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Summary:	Using the dating algorithm by Harding and Pagan (2002) on a quarterly database for 23 emerging market economies (EMEs) and 12 developed countries over the period 1980.Q1 - 2006.Q2, the authors proceed to characterize and compare the business cycle features of these two groups. They first find that recessions are deeper and more frequent among EMEs (especially, among LAC countries) and that expansions are more sizable and longer (especially, among East Asian countries). After this characterization, this paper explores the linkages between the cost of recessions (as measured by the average annual rate of output loss in the peak-to-trough phase of the cycle) and several country-specific factors. The main findings are: (a) adverse terms of trade shocks raises the cost of recessions in countries with a more open trade regime, deeper financial markets and, surprisingly, a more diversified output structure. (b) U.S. interest rate shocks seem to have a significant impact on the cost of recessions in East Asian countries. (c) Recessions tend to be deeper if they coincide with a sudden stop, but the effect tends to be mitigated in countries with deeper domestic credit markets. (d) Countries with stronger institutions tend to have less costly recessions.

Characterizing the Business Cycles of Emerging Economies

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