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Department ofEconomics


Business Cycles in Small Open Economies: Evidence from Panel Data between 1900 and 2013

Lan Nguyen and Wataru Miyamoto

International Economic Review 58(3), pp 1007-44, August 2017


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Using a novel data set for 17 countries between 1900 and 2013, we characterize business cycles in both  small developed  and developing countries in a model with financial frictions and a common shock structure. We estimate the model jointly for these 17 countries using Bayesian methods. We find that financial frictions are an important feature for not only developing but also small developed countries. Furthermore, business cycles in both groups of countries are marked with trend productivity shocks. Common disturbances explain one third of the fluctuations in small open economies, especially during important worldwide phenomena.

LSB Research, ECON, 2017, Lan Nguyen