Rara Avis: Latin American populism in the 21st century

At the turn of the century, some new governments in Latin America have been characterized as populist (the so-called new Latin American Left). We focus on the macroeconomic implications of the policies adopted by these governments (instead of their leaders’ rhetoric) and we investigate to what extent this characterization holds. To do so, we identify economic populism with a bivariate vector autoregressive model using real and nominal wages and where populist shocks have no long-run effects on the former variable. The underlying idea of this identification is that populist leaders tend to prioritize income distribution with higher nominal wages disregarding the consistency with the evolution of productivity. Our results indicate that economic populism is not as widespread as previously thought, and that our nuanced approach leads to more informative results. For instance, while we find populism in Argentina, the results for Brazil, Bolivia and Ecuador show only sporadic populist events. In the remaining countries, we do not find persistent economic populism.