I investigate the determinants of EME’s business cycles and real exchangerate developments. VAR models are estimated for 15 EME countries and sign restrictions are applied in line with a large number of macroeconomic models. e use of sign restrictions draws on work by Faust (1998), Canova and De Nicolò (2002), and Uhlig (2005) for advanced economies.*

e remainder of this chapter is organized as follows: Section 15.2 presents my econometric methodology; Section 15.3 briefl y describes the data; Section 15.4 discusses the results of this chapter, including the reaction of macroeconomic variables to a number of structural shocks as well as variance decomposition analysis; and Section 15.5 provides some concluding remarks.