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Investment-specific shocks and real business cycles in emerging economies: Evidence from Brazil

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  • Araújo, Eurilton

Abstract

This paper investigates the role of the RBC (Real Business Cycle) model with investment-specific technology shocks in explaining business cycle fluctuations in Brazil. I consider the role of transitory and permanent components of neutral and investment-specific technology shocks. I fit the model to the data using Bayesian techniques to show that the investment-specific shocks are important sources of fluctuations in the estimated model. In fact, in the context of the model, investment-specific shocks can account for remarkable percentages of fluctuations in consumption growth, GDP growth, investment growth and trade balance to GDP ratio. Furthermore, I present simulation evidence showing that the RBC model cannot account for some important features of the data.

Suggested Citation

  • Araújo, Eurilton, 2012. "Investment-specific shocks and real business cycles in emerging economies: Evidence from Brazil," Economic Modelling, Elsevier, vol. 29(3), pages 671-678.
    • Handle: RePEc:eee:ecmode:v:29:y:2012:i:3:p:671-678
    DOI: 10.1016/j.econmod.2012.01.009
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    3. Yadav, Jayant, 2020. "Flight to Safety in Business cycles," MPRA Paper 104093, University Library of Munich, Germany.

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    More about this item

    Keywords

    Investment-specific shocks; Business cycles; Brazil; Fluctuations; DSGE models;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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