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Latin American Falls, Rebounds and Tail Risks

Author

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  • Luciano Campos
  • Danilo Leiva-León
  • Steven Zapata- Álvarez

Abstract

This paper proposes comprehensive measures of the Latin American business cycle that help to infer the expected deepness of recessions, and strength of expansions, as they unfold in real time. These measures are based on the largest country economies in the region by accounting for intrinsic features of real activity, such as comovement, nonlinearities, asymmetries, and are also robust to unprecedented shocks, like the COVID-19 pandemics. The proposed measures provide timely updates on (i) inferences on the state of the regional economy, (ii) the underlying momentum embedded in short-term fluctuations of real activity, and (iii) the quantification of macroeconomic tail risks. We evaluate as well the time-varying effects of U.S. financial conditions on the Latin American economy by employing the proposed measures, and identify periods of persistent international spillovers. **** RESUMEN: En este documento se proponen diferentes medidas para estimar el ciclo económico de América latina, con las que se permite observar la profundidad de las recesiones y la fuerza de las expansiones de la economía de la región en tiempo real. Estas medidas se construyen con los datos observados de las economías más grandes de latinoamérica y tienen en cuenta diferentes características de la actividad real, capturando los comovimientos, no linealidades y asimetrías que caracterizan la actividad económica de la región, al tiempo que son robustas frente a choques sin precedentes como el de la pandemia COVID 19. Las medidas propuestas proporcionan información sobre; (i) el estado de la economía regional, (ii) el momentum de la actividad económica en el corto plazo, y (iii) la cuantificación de los riesgos de cola macroeconómicos. Usando las medidas propuestas también evaluamos los efectos que tienen las condiciones financieras de EE.UU sobre la economía latinoamericana.

Suggested Citation

  • Luciano Campos & Danilo Leiva-León & Steven Zapata- Álvarez, 2022. "Latin American Falls, Rebounds and Tail Risks," Borradores de Economia 1201, Banco de la Republica de Colombia.
    • Handle: RePEc:bdr:borrec:1201
    DOI: 10.32468/be.1201
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    References listed on IDEAS

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    More about this item

    Keywords

    Business Cycles; Factor Model; Nonlinear; Latin America; Ciclos Económicos; Modelos de Factores; No linealidad; América Latina;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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