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Common Factors in Latin America’s Business Cycles

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  • Aiolfi, Marco
  • Catão, Luis A. V.
  • Timmermann, Allan G

Abstract

We develop a common factor approach to reconstruct new business cycle indices for Argentina, Brazil, Chile, and Mexico ("LAC-4") from an unprecedentedly comprehensive dataset spanning 135 years. We establish the robustness of our indices through a variety of tests, use the indices to explore business cycle properties in LAC-4 and compare them with other countries across outward- and inward-looking policy regimes. We find that output persistence in LAC-4 has been consistently high across regimes, whereas volatility was strikingly high during the pre-1929 outward-looking regime but declined during the most recent shift towards greater openness. We also find a sizeable common regional factor driven by output and interest rates in advanced countries, including during inward-looking regimes

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7671.

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Date of creation: Jan 2010
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Handle: RePEc:cpr:ceprdp:7671

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Keywords: factor models; International business cycles; Latin America;

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Citations

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Cited by:
  1. Luis A. V. Catao & Ana Fostel & Sandeep Kapur, 2008. "Persistent Gaps and Default Traps," Birkbeck Working Papers in Economics and Finance 0803, Birkbeck, Department of Economics, Mathematics & Statistics.
  2. Sumru Altuğ & Melike Bildirici, 2010. "Business Cycles around the Globe: A Regime Switching Approach," Working Papers 0032, Yildiz Technical University, Department of Economics, revised Mar 2010.
  3. Jean-Pierre Allegret & Alain Sand-Zantman, 2008. "Monetary Integration Issues in Latin America: a multivariate assessment," Post-Print halshs-00353356, HAL.
  4. Melisso Boschi & Alessandro Girardi, 2008. "The contribution of domestic, regional, and international factors to Latin America’s business cycle," ISAE Working Papers 105, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  5. Jeromin Zettelmeyer, 2006. "Growth and Reforms in Latin America: A Survey of Facts and Arguments," IMF Working Papers 06/210, International Monetary Fund.
  6. Jean-Pierre Allégret & Alain Sand-Zantman, 2008. "Does a Monetary Union protect again foreign shocks? An assessment of Latin American integration using a Bayesian VAR," Working Papers 0809, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  7. Raúl Ibarra-Ramírez, 2010. "Forecasting Inflation in Mexico Using Factor Models: Do Disaggregated CPI Data Improve Forecast Accuracy?," Working Papers 2010-01, Banco de México.
  8. Anoop Singh, 2006. "Macroeconomic Volatility: The Policy Lessons from Latin America," IMF Working Papers 06/166, International Monetary Fund.
  9. repec:udt:wpbsdt:2012-03 is not listed on IDEAS

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