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The Transmission of US Shocks to Latin America

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Author Info
Canova, Fabio

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Abstract

I study whether and how US shocks are transmitted to eight Latin American countries. US shocks are identified using the procedure of Canova and De Nicolo’ (2002) and treated as exogenous with respect to Latin American economies. Posterior estimates for individual and average effects are constructed. US Monetary shocks produce significant fluctuations in Latin America, but real demand and supply shocks do not. Floaters and currency boarders display similar output responses but different inflation and interest rate responses. The financial channel plays a crucial role in the transmission. US disturbances explain important portions of the variability Latin American macrovariables, produce continental cyclical fluctuations and, in two episodes, destabilizing nominal exchange rate effects. Policy implications are discussed.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3963.

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Date of creation: Jul 2003
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Handle: RePEc:cpr:ceprdp:3963

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Related research
Keywords: bayesian methods; business cycles; exchange rate regimes; structural shocks;

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Find related papers by JEL classification:
C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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