Business cycles in emerging markets are characterized by high levels of volatility in income, investment, and net exports. Consumption is more volatile than income, and net exports are highly countercyclical (see Aguiar and Gopinath, 2007). Furthermore, the interest rates faced by these economies are highly volatile and negatively correlated with income, as described in Neumeyer and Perri (2005...

In this paper, we study how the interplay between technology shocks and financial variables shapes the dynamics of economies characterized by heterogeneous agents. Most of standard economic literature has centered the analysis of decentralized economies on the representative agent hypothesis (REH), often treating short-run and long-run phenomena with distinct sets of models. However the recent ...

We ask how export demand shocks associated with the Asian financial crisis affected Chinese exporters. We construct firm-specific exchange rate shocks based on the precrisis destinations of firms’ exports. Because the shocks were unanticipated and large, they are a plausible instrument for identifying the impact of exporting on firm productivity and other outcomes. We find that firms whose expo...

We develop a two-country, dynamic general equilibrium model that links cross-country differences in net foreign asset and consumption dynamics to differences in discount factors and steady-state levels of productivity. We compare the results of the model to those of VARs for the G3 economies. We identify country-specific productivity shocks by assuming that productivity does not respond contemp...

This paper examines a tractable real business cycle model with idiosyncratic productivity shocks and binding credit constraints on entrepreneurs. The model shows how firm volatility increases in combination with credit market development. It further generates the observed comovement of credit and firm volatility with output at business cycle frequencies in response to aggregate productivity sho...