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Threshold effects of terms of trade on Latin American growth

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  • Vianna, Andre C.
  • Mollick, Andre V.

Abstract

This paper investigates nonlinear relationships between terms of trade volatility (totvol) and economic growth in 14 Latin American economies from 1997 to 2014. In the 2000s, Latin American countries experienced accelerated economic growth often attributed to commodity price booms. We split the sample into two regimes based on totvol thresholds determined by bootstrap techniques. Fixed effects, instrumental variable and dynamic panel regressions address endogeneity in trade growth, subject to traditional economic channels such as domestic investment, population growth, exchange rate, government size, and institutions. We find statistically significant thresholds and stronger trade-growth links during the 2000s commodity boom and in larger economies.

Suggested Citation

  • Vianna, Andre C. & Mollick, Andre V., 2021. "Threshold effects of terms of trade on Latin American growth," Economic Systems, Elsevier, vol. 45(4).
    • Handle: RePEc:eee:ecosys:v:45:y:2021:i:4:s0939362521000303
    DOI: 10.1016/j.ecosys.2021.100882
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    2. Gnangnon, Sèna Kimm, 2023. "Effects of the Utilization of Non-Reciprocal Trade Preferences Offered by QUAD Countries on Economic Growth in Beneficiary Countries," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 45(1), pages 33-68.

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    More about this item

    Keywords

    Economic development; Latin America; Panel data; Threshold techniques; Trade-growth nexus;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • B27 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - International Trade and Finance

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