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Abstract

Emerging market economy business cycles are typically characterized by high consumption and output volatility, strongly counter-cyclical current accounts, and counter-cyclical real interest rates. Evidence from the wider EME and less developed economy business cycle experience suggests however that real interest rates can also be pro-cyclical. We reconcile the pro-cyclicality of real interest rates with the above facts by embedding fiscal policy into a standard emerging market business cycle model. Weshow that fiscal policy makes real interest rates a-cyclical or pro-cyclical. We use the model to replicate qualitatively some of the key features of the Indian business cycle.



Item Type: MPRA Paper -

Original Title: Fiscal Policy in an Emerging Market Business Cycle Model-

English Title: Fiscal Policy in an Emerging Market Business Cycle Model-

Language: English-

Keywords: Emerging Market Business Cycles, Fiscal Policy in a Small Open Economy, Indian Business Cycle, Interest Rate Shocks, Macroeconomic Stabilization-

Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; CyclesF - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital MovementsF - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy MacroeconomicsH - Public Economics > H2 - Taxation, Subsidies, and Revenue-





Autor: Ghate, Chetan

Fuente: https://mpra.ub.uni-muenchen.de/60449/







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