Business cycles in emerging economies are more unstable than in developed countries. Real interest rates in these economies are opposite to the cycle and influence it. Consumption fluctuates more than production, and net exports are strongly linked to the cycle. A model of a small open economy shows that country risk, influenced by fundamental shocks, amplifies the impact of these shocks. By reducing country risk, output volatility in Argentina can be decreased by 27%. stabilizing international rates has a smaller effect on output volatility.