DETERMINANTS OF BUSINESS CYCLES IN EMERGING MARKET ECONOMIES: THE ROLE OF EXTERNAL FACTORS

The main aim of this study is to investigate the structure and sources of business cycles in emerging market economies and to determine how these cycles differ than those in developed countries by focusing on the role of external factors. The determinants of business cycles are analysed by applying not only the conventional panel data estimations but also common correlated effects panel mean group method, introduced by Pesaran (2006), which incorporates heterogeneity by allowing country-specific coefficients while accounting for the effects of common global shocks. The major results indicate the common global factors are the leading source of the business cycles both in emerging market economies and developed countries. However, domestic determinants of fluctuations differ across two groups of countries.