Business Cycles in Developing Countries: Are They Different?

Abstract

This paper demonstrates that developing countries differ considerably from their developed counterparts when focus is on the nature and characteristics of short-run macroeconomic fluctuations. Cycles are generally shorter, and the stylized facts of business cycles across countries are more diverse than those of the rather uniform industrialized countries. Supply-side models are generally superior in explaining changes in output, but a "one-size fits all" approach in formulating policy is inappropriate. Our results also illustrate the critical importance of understanding business regularities as a stepping-stone in the process of designing appropriate stabilization policy and macroeconomic management in developing countries.