Publication Type
Working Paper
Version
publishedVersion
Publication Date
3-2002
Abstract
Less developed countries (LDCs) have experienced considerable business cycles in recent decades. This coincides with significant increases in their external debt to GDP ratios. Recent theoretical credit cycles literature suggests that indebtedness, and the resulting liquidity constraints, could explain LDC business cycles. This paper builds a macroeconomic model to trace the LDC income paths. In this model indebtedness and liquidity constraints reduce aggregate investment. We use the World Data (1995) to calibrate for the convergence parameter. It is found that LDC cycles are convergent and non-oscillatory, and indebtedness delays the return to long-term steady state income.
Keywords
LDCs, credits, liquidity constraints, business cycles
Discipline
Economics | Growth and Development | Macroeconomics
Research Areas
Macroeconomics
Volume
02-2002
First Page
1
Last Page
19
Publisher
SMU Economics and Statistics Working Paper Series, No. 02-2002
City or Country
Singapore
Citation
LEUNG, Hing-Man.
Less Developed Country Business Cycles. (2002). 02-2002, 1-19.
Available at: https://ink.library.smu.edu.sg/soe_research/692
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.