Macroeconomics and Economic Policy

Business cycles, Sudden Stops and Small open economies. This subline analyzes the following three aspects. First, we study how financial frictions can help to understand some peculiar features of business cycles in Hong Kong. Second, we analyze the common (and uncommon) characteristics shared by some countries that have suffered Sudden Stops, in particular those related to the dynamics of the relative prices of traded to non-traded goods, and quantify for how much of the observed dynamics of the sectoral TFP’s, and of the interest rates, can explain the dynamics of the domestic relative prices of traded to non-traded goods. And, third, we analyze whether the Balassa-Samuelson hypothesis can explain the bilateral real exchange-rate and inflation gap observed in the last years between Hong Kong and the US.

Researchers: Paulina Etxebarria-Garaigorta and Amaia Iza

Recent Papers related to this line of research:

Etxeberria-Garaigorta, P. and A. Iza (2015) "What Makes Hong Kong Different?: The Effect of a Sudden Stop in a Small Open Economy Model", mimeo.

Etxeberria-Garaigorta, P. and A. Iza (2015) "The Balassa-Samuelson Hypothesis and the Hong Kong-U.S. Bilateral Real Exchange Rate (1990-2009)", mimeo.

Etxeberria-Garaigorta, P. and A. Iza (2015) "The Role of Productivity and Financial Frictions in the Business Cycles of a Small Open Economy: Hong Kong 1984-2011" Review of Development Economics 19(2), 400-414.

Etxeberria-Garaigorta, P. and A. Iza (2012) "Sudden Stops and the Real Exchange Rate in Hong Kong: A Two-Sector Neoclassical Framework", in Financial Crises, Impact and Response: The View from Emerging World, 175-196, Ed. Peter Koveos.