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Common factors in Latin America's business cycles

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

We develop a common factor approach to reconstruct new business cycle indices for Argentina, Brazil, Chile, and Mexico ("LAC-4") from a new dataset spanning 135Â years. We establish the robustness of our indices through extensive testing and use them to explore business cycle properties in LAC-4 across outward- and inward-looking policy regimes. We find that output persistence in LAC-4 has been consistently high across regimes, whereas volatility has been markedly time-varying but without displaying a clear-cut relationship with 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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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 95 (2011)
Issue (Month): 2 (July)
Pages: 212-228

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Handle: RePEc:eee:deveco:v:95:y:2011:i:2:p:212-228
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