Publication:
Medium-term Business Cycles in Developing Countries

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dc.contributor.authorComin, Diego
dc.contributor.authorLoayza, Norman
dc.contributor.authorPasha, Farooq
dc.contributor.authorServen, Luis
dc.date.accessioned2012-03-19T19:14:17Z
dc.date.available2012-03-19T19:14:17Z
dc.date.issued2009-12-01
dc.description.abstractEmpirical evidence - including the current global crisis - suggests that shocks from advanced countries often have a disproportionate effect on developing economies. Can this account for the fact that aggregate fluctuations are larger and more persistent in the latter than in the former economies? And what are the mechanisms at play? This paper addresses these questions using a model of an industrial and a developing economy trading goods and assets, with (i) a product cycle shaping the range of intermediate goods used to produce new capital in each country, and (ii) investment adjustment costs in the developing economy. Innovation by the advanced economy results in new intermediate goods, at first produced at home, and eventually transferred to the developing economy through direct investment. The pace of innovation and technology transfer is driven by profitability. This process of technology diffusion creates a medium-term connection between both economies, over and above the short-term link through trade. Calibration of the model to match Mexico-United States trade and foreign direct investment flows shows that this mechanism can explain why shocks to the United States economy have a larger effect on Mexico than on the United States itself, and hence why Mexico shows higher volatility than the United States; why business cycles in the United States lead to medium-term fluctuations in Mexico; and why consumption is not less volatile than output in Mexico.en
dc.identifierhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091202115041
dc.identifier.doi10.1596/1813-9450-5146
dc.identifier.urihttps://hdl.handle.net/10986/4338
dc.languageEnglish
dc.relation.ispartofseriesPolicy Research Working Paper ; No. 5146
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectADVANCED COUNTRIES
dc.subjectADVANCED ECONOMY
dc.subjectARBITRAGE
dc.subjectASSET PRICE
dc.subjectBENCHMARK
dc.subjectBILATERAL TRADE
dc.subjectBUDGET CONSTRAINT
dc.subjectBUSINESS CYCLE
dc.subjectBUSINESS CYCLES
dc.subjectCAPITAL ACCUMULATION
dc.subjectCAPITAL FLOWS
dc.subjectCAPITAL FORMATION
dc.subjectCAPITAL GAINS
dc.subjectCAPITAL MARKETS
dc.subjectCAPITAL SHARE
dc.subjectCAPITAL STOCK
dc.subjectCOMPARATIVE ADVANTAGE
dc.subjectCONSUMERS
dc.subjectCREDIT MARKETS
dc.subjectCURRENCY
dc.subjectCURRENT ACCOUNT BALANCE
dc.subjectDECLINE IN INVESTMENT
dc.subjectDEVELOPING COUNTRIES
dc.subjectDEVELOPING COUNTRY
dc.subjectDEVELOPING ECONOMIES
dc.subjectDEVELOPING ECONOMY
dc.subjectDIVIDENDS
dc.subjectDOMESTIC INTEREST RATES
dc.subjectDURABLE
dc.subjectECONOMIC FLUCTUATIONS
dc.subjectECONOMIC GROWTH
dc.subjectELASTICITY OF LABOR SUPPLY
dc.subjectELASTICITY OF SUBSTITUTION
dc.subjectEMERGING ECONOMIES
dc.subjectEMERGING MARKET
dc.subjectEMERGING MARKET BUSINESS
dc.subjectENDOGENOUS VARIABLES
dc.subjectEQUILIBRIUM
dc.subjectEXCHANGE RATE
dc.subjectEXOGENOUS VARIABLES
dc.subjectEXPENDITURES
dc.subjectEXPORTERS
dc.subjectEXPORTS
dc.subjectFACTOR DEMAND
dc.subjectFACTORS OF PRODUCTION
dc.subjectFINANCIAL CRISES
dc.subjectFOREIGN DIRECT INVESTMENT
dc.subjectFUTURE PRICE
dc.subjectGDP
dc.subjectGOVERNMENT SPENDING
dc.subjectGROWTH POTENTIAL
dc.subjectGROWTH RATE
dc.subjectGROWTH RATES
dc.subjectINSURANCE
dc.subjectINTEREST RATE
dc.subjectINTEREST RATES
dc.subjectINTERMEDIATE GOODS
dc.subjectINTERNATIONAL BANK
dc.subjectINTERNATIONAL BORROWING
dc.subjectINTERNATIONAL CAPITAL
dc.subjectINTERNATIONAL CREDIT
dc.subjectINTERNATIONAL INSURANCE
dc.subjectINTERNATIONAL INVESTMENT
dc.subjectINTERNATIONAL LENDING
dc.subjectINTERNATIONAL TRADE
dc.subjectINVESTING
dc.subjectINVESTMENT DECISIONS
dc.subjectINVESTMENT FLOWS
dc.subjectLABOR MARKET
dc.subjectMACROECONOMIC CONDITIONS
dc.subjectMACROECONOMIC PERFORMANCE
dc.subjectMACROECONOMICS
dc.subjectMARGINAL COST
dc.subjectMARGINAL COST OF PRODUCTION
dc.subjectMARGINAL COSTS
dc.subjectMARGINAL PRODUCT
dc.subjectMARKET ENTRY
dc.subjectMARKET ENTRY COSTS
dc.subjectMARKET EQUILIBRIUM
dc.subjectMARKET POWER
dc.subjectMARKET VALUE
dc.subjectOBSOLESCENCE
dc.subjectOPEN ECONOMY
dc.subjectOPTIMAL INVESTMENT
dc.subjectOUTPUT
dc.subjectOUTPUTS
dc.subjectOUTSOURCING
dc.subjectOVERHEAD COST
dc.subjectOVERHEAD COSTS
dc.subjectPATENTS
dc.subjectPERMANENT INCOME
dc.subjectPOLITICAL ECONOMY
dc.subjectPRICE ELASTICITY
dc.subjectPRICE FLUCTUATIONS
dc.subjectPRIVATE CAPITAL
dc.subjectPRODUCTIVITY
dc.subjectRATE OF RETURN
dc.subjectREAL GDP
dc.subjectREAL INTEREST
dc.subjectREAL INTEREST RATES
dc.subjectRECESSION
dc.subjectRETURNS
dc.subjectRETURNS TO SCALE
dc.subjectSUNK COSTS
dc.subjectSUPPLIER
dc.subjectSURPLUS
dc.subjectTECHNOLOGICAL CHANGE
dc.subjectTECHNOLOGY TRANSFER
dc.subjectTRADE BALANCE
dc.subjectTRADE BARRIERS
dc.subjectTRADES
dc.subjectTRADING
dc.subjectVOLATILITIES
dc.subjectVOLATILITY
dc.subjectWAGES
dc.subjectWHOLESALE PRICE
dc.titleMedium-term Business Cycles in Developing Countriesen
dspace.entity.typePublication
okr.crossref.titleMedium-Term Business Cycles In Developing Countries
okr.date.doiregistration2025-04-10T11:59:00.339549Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091202115041
okr.guid527871468331065748
okr.identifier.doi10.1596/1813-9450-5146
okr.identifier.externaldocumentum000158349_20091202115041
okr.identifier.internaldocumentum11445946
okr.identifier.reportWPS5146
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2009/12/02/000158349_20091202115041/Rendered/PDF/WPS05146.pdfen
okr.relation.associatedurlhttps://openknowledge.worldbank.org/handle/10986/20534
okr.sectorPublic Administration, Law, and Justice :: Central government administration
okr.themeEconomic management :: Analysis of economic growth
okr.unitDevelopment Research Group (DECRG)
okr.volume1 of 1
relation.isAuthorOfPublication2c4139d2-7458-5296-9aea-6d3db3e1ae1e
relation.isAuthorOfPublication.latestForDiscovery2c4139d2-7458-5296-9aea-6d3db3e1ae1e
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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