Or in canada see their figure 2 figure 53 shows why

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or in Canada (see their figure 2).Figure5.3shows why using short samples for estimation may be problematic. It displays thecyclical component of the log of real GDP per capita for seven Latin American countries over theperiod 1900-2005. In the figure, the cycle is computed as percent deviations of GDP from a cubictrend. The period 1980-2005 contains only between one and a half and two cycles for most of theLatin American economies included in the figure. Doing econometrics with so few cycles is prob-lematic for uncovering virtually any parameter value of a business-cycle model, but particularly fortelling apart highly persistent but stationary productivity shocks from nonstationary productivityshocks.The second difficulty with the econometric strategy pursued in Aguiar and Gopinath is that itallows room only for productivity shocks. This would not be a big problem if no other candidateshocks could be identified as potentially important in driving business cycles in emerging economies.
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Open Economy Macroeconomics, Chapter 5215Figure 5.3: Business Cycles in Latin America: 1900-200519001910192019301940195019601970198019902000-0.8-0.7-0.6-0.5-0.4-0.3-0.2-0.100.10.20.3ArgentinaBrazilChileColombiaMexicoPeruUruguayVenezuelaNote.PercentdeviationsofrealGDPpercapitafromacubictrend.Source:DatabasecompiledbyR.BarroandJ.Urs´ua,availableonlineat.
216June 13, 2015, M. Uribe and S. Schmitt-Groh´eBut this is not the case. For example, a growing number of studies show that world interest-rateshocks and country-spread shocks play an important role in driving business cycles in emergingcountries (see, for example, Neumeyer and Perri, 2005; and Uribe and Yue, 2006). Omitting theseand other relevant shocks in the econometric estimation necessarily induces a bias in favor of theshocks that are included.Finally, the present model limits attention to a frictionless neoclassical framework. This mightalso be an oversimplification. A large body of work points at financial frictions, including defaultrisk and balance-sheet effects, as important propagation mechanisms of business cycles in emergingeconomies (see part??of this book).Omitting these sources of friction might cause a spuriousincrease in the estimated variance and persistence of the exogenous driving processes.Garc´ıa-Cicco, Pancrazi, and Uribe (2010) address these concerns by estimating a SOE-RBCmodel in which stationary and nonstationary productivity shocks compete with interest-rate andcountry-spread shocks in explaining business cycles. To obtain a reliable measure of the nonsta-tionary component of productivity, they estimate the model using long data samples spanning over100 years. And to capture the presence of financial frictions, these authors estimate the parametergoverning the debt elasticity of the country interest rate. They find that once financial shocks andfrictions are taken explicitly into account, the data assigns a small role to permanent technology

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Term
Winter
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The Land, gross domestic product, rich countries
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