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Expansions and Contractions in Some Latin American Countries: A view Throught Non-Linear Models

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  • Luis Eduardo Arango

    ()

  • Luis Fernando Melo

    ()

Abstract

The study of the asymmetric behavior of macroeconomic variables over the business cycles phases has had a long tradition in economics. In this work we find evidence in favor of the hypothesis of having a Star-type nonlinear asymmetric behavoir of the economy activity, over the last two decades, in four Latin American countries: Brazil, Chile, Colombia and Mexico. For Venezuela the null hypothesis of a linear process could not be rejected under the method placed by Granger and Terasvirta (1993). Economic activity is proxied by monthly based industrial production indexes. Except for the case of Mexico we arrive to asymmetric representations of the processes. However, evidence of asymmetric behavoir is found according to the impulse response function analysis for all the countries.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 186.

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Handle: RePEc:bdr:borrec:186
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Keywords: Real industrial production index; nonlinearties; STAR models; impulse responses;

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Find related papers by JEL classification:
  • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
  • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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  1. Richard Baldwin & Paul R. Krugman, 1986. "Persistent Trade Effects of Large Exchage Rate Shocks," NBER Working Papers 2017, National Bureau of Economic Research, Inc.
  2. Clive W. Granger & Timo Terasvirta & Heather M. Anderson, 1993. "Modeling Nonlinearity over the Business Cycle," NBER Chapters, in: Business Cycles, Indicators and Forecasting, pages 311-326 National Bureau of Economic Research, Inc.
  3. J. Bradford De Long & Lawrence H. Summers, . "How Does Macroeconomic Policy Matter?," J. Bradford De Long's Working Papers _130, University of California at Berkeley, Economics Department.
  4. Terasvirta, T & Anderson, H M, 1992. "Characterizing Nonlinearities in Business Cycles Using Smooth Transition Autoregressive Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S119-36, Suppl. De.
  5. Kontolemis, Zenon G, 1997. "Does Growth Vary over the Business Cycle? Some Evidence from the G7 Countries," Economica, London School of Economics and Political Science, vol. 64(255), pages 441-60, August.
  6. Robert B. Davies, 2002. "Hypothesis testing when a nuisance parameter is present only under the alternative: Linear model case," Biometrika, Biometrika Trust, vol. 89(2), pages 484-489, June.
  7. Acemoglu, Daron & Scott, Andrew, 1994. "Asymmetries in the Cyclical Behaviour of UK Labour Markets," Economic Journal, Royal Economic Society, vol. 104(427), pages 1303-23, November.
  8. D. A. Peel & A. E. H. Speight, 1998. "Threshold nonlinearities in output: some international evidence," Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 323-333.
  9. Cristina Fernández & Andrés González, . "Integración y Vulneralidad Externa en Colombia," Borradores de Economia 156, Banco de la Republica de Colombia.
  10. repec:fth:harver:1418 is not listed on IDEAS
  11. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  12. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
  13. Lundbergh, Stefan & Teräsvirta, Timo, 2000. "Forecasting with smooth transition autoregressive models," SSE/EFI Working Paper Series in Economics and Finance 390, Stockholm School of Economics.
  14. Simpson, Paul W & Osborn, Denise R & Sensier, Marianne, 2001. "Modelling Business Cycle Movements in the UK Economy," Economica, London School of Economics and Political Science, vol. 68(270), pages 243-67, May.
  15. Boldin Michael D., 1999. "Should Policy Makers Worry about Asymmetries in the Business Cycle?," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 3(4), pages 1-20, January.
  16. J. Bradford DeLong & Lawrence H. Summers, 1988. "How Does Macroeconomic Policy Affect Output?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 433-494.
  17. Chetty, V. K. & Heckman, J. J., 1986. "A dynamic model of aggregate output supply, factor demand and entry and exit for a competitive industry with heterogeneous plants," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 237-262.
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Cited by:

  1. Luis E Arango & Luz Adriana Flórez & Angélica M Arosemena, 2005. "El Tramo Corto de la Estructura a Plazo como Predictor de Expectativas de la Actividad Económica en Colombia," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 42(125), pages 79-101.
  2. Carlos Esteban Posada, 2002. "Modelos de crecimiento y estilos de desarrollo: varias precisiones y una conjetura," REVISTA APUNTES DEL CENES, UNIVERSIDAD PEDAGOGICA Y TECNOLOGICA DE COLOMBIA.

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