The right fit for the wrong reasons: Real business cycle in an oil-dependent economy

• Autores: Miguel Santos
• Localización: Latin American Journal of Economics: formerly Cuadernos de Economía, ISSN-e 0719-0433, Vol. 53, Nº. 1 (Final Issue), 2016, págs. 61-94
• Idioma: inglés
• Enlaces
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• Resumen

  • Venezuela has an oil-dependent economy subject to large exogenous shocks and a rigid labor market. These features go straight to the heart of two weaknesses of real business cycle (RBC) theory widely reported in the literature: neither shocks are volatile enough nor real salaries sufficiently flexible as required by the RBC framework to replicate the behavior of the economy. We calibrate a basic RBC model and compare a set of relevant statistics from RBC-simulated time series with actual data for Venezuela and the benchmark case of the United States (1950-2008). Despite Venezuela being a heavily regulated economy, RBC-simulated series provide a good fit, in particular with regard to labor markets.