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Common Factors in Latin America's Business Cycles

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Author Info
Marco Aiolfi
Allan Timmermann
Luis Catão

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Abstract

This paper constructs new business cycle indices for Argentina, Brazil, Chile, and Mexico based on common dynamic factors extracted from a comprehensive set of sectoral output, external data, and fiscal and financial variables spanning over a century. The constructed indices are used to derive a business cycle chronology for these countries and characterize a set of new stylized facts. In particular, we show that all four countries have historically displayed a striking combination of high business cycle and persistence relative to benchmark countries, and that such volatility has been time-varying, with important differences across policy regimes. We also uncover a sizeable common factor across the four economies which has greatly limited scope for regional risk sharing.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/49.

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Length: 64 pages
Date of creation: 07 Mar 2006
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Handle: RePEc:imf:imfwpa:06/49

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Keywords: Business cycles ; Latin America ; Argentina ; Brazil ; Chile ; Mexico ; Economic models ;

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Luis A. V. Catao & Ana Fostel & Sandeep Kapur, 2008. "Persistent Gaps and Default Traps," Birkbeck Working Papers in Economics and Finance 0803, Birkbeck, School of Economics, Mathematics & Statistics. [Downloadable!]
    Other versions:
  2. Jeromino Zettelmeyer, 2006. "Growth and Reforms in Latin America: A Survey of Facts and Arguments," IMF Working Papers 06/210, International Monetary Fund. [Downloadable!]
  3. 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. [Downloadable!]
  4. Anoop Singh, 2006. "Macroeconomic Volatility: The Policy Lessons from Latin America," IMF Working Papers 06/166, International Monetary Fund. [Downloadable!]
  5. Marc Hallin & Roman Liska, 2008. "Dynamic Factors in the Presence of Block Structure," Economics Working Papers ECO2008/22, European University Institute. [Downloadable!]
    Other versions:
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