The dissertation consists of three chapters that study the link and how are developing countries affected by developed countries. Chapter 1 shows how borrowing constraints affect the medium and long term behavior of per-capita consumption in Latin America, when they are affected by productivity and international interest rate shocks. Chapter 2 compares the results from Chapter 1 with those of a business cycle accounting exercise and explains the faults from the model suggested in the previous chapter. Finally, Chapter 3 shows how the high relative volatility of consumption to output observed in developing countries and in some developed countries is due to the existence and miss-measurement of the informal economy.
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