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Growth and Macroeconomic Fluctuations: The Case of Latin America

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  • Pablo Cotler

    () (Department of Economics, Universidad Iberoamericana, Mexico City. Mexico)

Abstract

Based on time-series from 1960 to 1995, we show the existence –for Latin American countries– of a short and long run negative correlation between economic growth and uncertainty. The probable cause of such relationship is time-variant; it is only after 1990 that investment-based theories on the link between uncertainty and growth cannot be rejected by the data. Further, the data cannot support the claim that government expenditure explains the correlation between growth and uncertainty. Our results suggest that the average growth rate is endogenous to policy innovations. This implies that the long-run depends on short-run movements in activity, thereby casting some doubts on the conventional wisdom that assumes the dichotomy between an invariant steady state path and fluctuations around it.

Suggested Citation

  • Pablo Cotler, 2000. "Growth and Macroeconomic Fluctuations: The Case of Latin America," Economía Mexicana NUEVA ÉPOCA, , vol. 0(1), pages 41-59, January-J.
  • Handle: RePEc:emc:ecomex:v:9:y:2000:i:1:p:41-59
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    1. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-1151, December.
    2. Blanchard, Olivier, 1997. "Is There a Core of Usable Macroeconomics?," American Economic Review, American Economic Association, vol. 87(2), pages 244-246, May.
    3. Glewwe, Paul, 1996. "The relevance of standard estimates of rates of return to schooling for education policy: A critical assessment," Journal of Development Economics, Elsevier, vol. 51(2), pages 267-290, December.
    4. Hofman, Andre A, 1992. "Capital Accumulation in Latin America: A Six Country Comparison for 1950-89," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 38(4), pages 365-401, December.
    5. Sanyal, Kalyan K & Jones, Ronald W, 1982. "The Theory of Trade in Middle Products," American Economic Review, American Economic Association, vol. 72(1), pages 16-31, March.
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