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Commodity prices and the business cycle in Latin America: Living and dying by commodities

  • Maximo Camacho


    (Universidad de Murcia)

  • Gabriel Perez-Quiros


    (Banco de España and CEPR)

We analyze the dynamic interactions between commodity prices and output growth of the seven biggest Latin American exporters: Argentina, Brazil, Colombia, Chile, Mexico, Peru and Venezuela. Using a novel defi nition of Markovswitching impulse response functions, we fi nd that the response of their respective output growth to commodity price shocks is time-dependent, size-dependent and sign-dependent. Overall, the major evidence of asymmetries in output growth responses occurs when commodity price shocks lead to regime shifts. Accordingly, we consider that the design of optimal counter-cyclical stabilization policies in this region should take into account that the reactions of economic activity vary considerably across business cycle regimes.

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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1304.

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Length: 49 pages
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:bde:wpaper:1304
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