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Volatility and Growth in Latin America

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  • Ratna Sahay
  • Rishi Goyal
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    Abstract

    This paper compares the pattern of macroeconomic volatility in 17 Latin American countries during episodes of high and low growth since 1970, examining in particular the role of policy volatility. Macroeconomic outcomes are distinguished from macroeconomic policies, structural reforms and reversals, shocks, and institutional constraints. Based on previous work, a composite measure of structural reforms is constructed for the 1970-2004 period. We find that outcomes and policies are more volatile in low growth episodes, while shocks (except U.S. interest rates) are similar across episodes. Fiscal policy volatility is associated with lower growth, but fiscal policy procyclicality is not. Low levels of market-oriented reforms and structural reform reversals are also associated with lower growth.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/287.

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    Length: 52
    Date of creation: 01 Dec 2006
    Date of revision:
    Handle: RePEc:imf:imfwpa:06/287

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    Related research

    Keywords: Latin America; Economic growth; Economic reforms; Economic models; fiscal policy; terms of trade; exchange rate regime; fiscal balance; trade liberalization; market orientation; discretionary fiscal policy; fiscal expenditures; fiscal expenditure; output growth; trade openness; per capita income; public debt; terms of trade shocks; trade shocks; fiscal balances; trade growth; central government fiscal; government spending; exchange rate regimes; external shocks; output volatility; fiscal policies; global shocks; trade integration; public expenditure; trade regimes; fiscal imbalances; fiscal adjustment; trade changes; public spending; fiscal contractions; political economy; fiscal contraction; fiscal imbalance; trade taxes; fiscal rules; oil prices; income distribution; central government expenditures; per capita growth rate; trade shock; external trade; fiscal adjustments; trade barriers; exogenous shock; access to capital market; government expenditure; fiscal deficit; government expenditures;

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    References

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    Citations

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    Cited by:
    1. Andreas Billmeier & Isabella Massa, 2007. "What Drives Stock Market Development in the Middle East and Central Asia," IMF Working Papers 07/157, International Monetary Fund.
    2. Alvaro CUERVO-CAZURRA & Luis Alfonso DAU, 2008. "Structural Reform And Firm Profitability In Developing Countries," William Davidson Institute Working Papers Series wp940, William Davidson Institute at the University of Michigan.
    3. Xavier, Wlamir Gonçalves & Bandeira-de-Mello, Rodrigo & Marcon, Rosilene, 2014. "Institutional environment and Business Groups' resilience in Brazil," Journal of Business Research, Elsevier, Elsevier, vol. 67(5), pages 900-907.
    4. Anoop Singh & Martin D. Cerisola, 2006. "Sustaining Latin America's Resurgence," IMF Working Papers 06/252, International Monetary Fund.
    5. Allard, Gayle & Martinez, Candace A. & Williams, Christopher, 2012. "Political instability, pro-business market reforms and their impacts on national systems of innovation," Research Policy, Elsevier, Elsevier, vol. 41(3), pages 638-651.
    6. Anoop Singh, 2006. "Macroeconomic Volatility," IMF Working Papers 06/166, International Monetary Fund.
    7. Roberto Steiner & Irene Clavijo & Natalia Salazar, 2008. "Colombia´s Efforts at Achieving Inclusive and Sustainable Growth: The Road Traveled and the Challenges Ahead," INFORMES DE INVESTIGACIÓN 009058, FEDESARROLLO.
    8. Benedict J. Clements & Christopher Faircloth & Marijn Verhoeven, 2007. "Public Expenditure in Latin America," IMF Working Papers 07/21, International Monetary Fund.
    9. José María Fanelli, 2009. "Economic Policy out of the Corridor. Reflections on the Global Crisis and the Latin American Experience," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, Central Bank of Argentina, Economic Research Department, vol. 1(53-54), pages 73-105, January -.

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