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Commodity Prices and the Business Cycle in Latin America: Living and Dying by Commodities?

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  • Maximo Camacho
  • Gabriel Perez-Quiros

Abstract

We analyze the dynamic interactions between commodity prices and output growth of the seven biggest Latin American exporters: Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela. Using a novel definition of Markov-switching impulse response functions, we find that the response of each country's output growth to commodity price shocks is time dependent, size dependent, and sign dependent. The major evidence of asymmetries in output growth responses occurs when commodity price shocks lead to regime shifts. Thus, we conclude that the design of optimal countercyclical stabilization policies should consider that the reactions of economic activity vary considerably across business cycle regimes.

Suggested Citation

  • Maximo Camacho & Gabriel Perez-Quiros, 2014. "Commodity Prices and the Business Cycle in Latin America: Living and Dying by Commodities?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(2), pages 110-137.
  • Handle: RePEc:mes:emfitr:v:50:y:2014:i:2:p:110-137
    DOI: 10.2753/REE1540-496X500207
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Karamé, F., 2012. "An algorithm for generalized impulse-response functions in Markov-switching structural VAR," Economics Letters, Elsevier, vol. 117(1), pages 230-234.
    2. repec:mes:eaeuec:v:53:y:2015:i:5:p:357-376 is not listed on IDEAS
    3. Brada & Kubíček & Kutan & Tomšík, 2015. "Inflation Targeting: Insights from Behavioral Economics," Eastern European Economics, Taylor & Francis Journals, vol. 53(5), pages 357-376, September.
    4. Ercio Muñoz S. & Mariel C. Siravegna, 2013. "¿Tiene un Impacto el Precio de las Materias Primas Sobre las Bolsas de América Latina?," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 16(3), pages 102-118, December.
    5. Khalifa, Ahmed & Caporin, Massimiliano & Hammoudeh, Shawkat, 2015. "Spillovers between energy and FX markets: The importance of asymmetry, uncertainty and business cycle," Energy Policy, Elsevier, vol. 87(C), pages 72-82.
    6. Ftiti, Zied & Kablan, Sandrine & Guesmi, Khaled, 2016. "What can we learn about commodity and credit cycles? Evidence from African commodity-exporting countries," Energy Economics, Elsevier, vol. 60(C), pages 313-324.
    7. Karamé, Frédéric, 2015. "Asymmetries and Markov-switching structural VAR," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 85-102.

    More about this item

    JEL classification:

    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • Y - Miscellaneous Categories
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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