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Common Factors in Latin America’s Business Cycles

  • Aiolfi, Marco
  • Catão, Luis A. V.
  • Timmermann, Allan G

We develop a common factor approach to reconstruct new business cycle indices for Argentina, Brazil, Chile, and Mexico ("LAC-4") from an unprecedentedly comprehensive dataset spanning 135 years. We establish the robustness of our indices through a variety of tests, use the indices to explore business cycle properties in LAC-4 and compare them with other countries across outward- and inward-looking policy regimes. We find that output persistence in LAC-4 has been consistently high across regimes, whereas volatility was strikingly high during the pre-1929 outward-looking regime but declined during the most recent shift towards greater openness. We also find a sizeable common regional factor driven by output and interest rates in advanced countries, including during inward-looking regimes

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7671.

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Date of creation: Jan 2010
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Handle: RePEc:cpr:ceprdp:7671
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  1. Don Harding & Adrian Pagan, 2000. "Disecting the Cycle: A Methodological Investigation," Econometric Society World Congress 2000 Contributed Papers 1164, Econometric Society.
  2. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-57, March.
  3. Reinhart, Carmen M. & Vegh, Carlos A., 1995. "Nominal interest rates, consumption booms, and lack of credibility: A quantitative examination," Journal of Development Economics, Elsevier, vol. 46(2), pages 357-378, April.
  4. Hausmann, Ricardo & Pritchett, Lant & Rodrik, Dani, 2004. "Growth Accelerations," CEPR Discussion Papers 4538, C.E.P.R. Discussion Papers.
  5. Pesaran, M.H. & Pierse, R.G. & Lee, K.C., 1990. "Persistence, Cointegration And Aggregation: A Disaggregated Analysis Of Output Fluctuations In The U.S. Economy," Papers 25, California Los Angeles - Applied Econometrics.
  6. Luis A. V. Catao & Ana Fostel & Sandeep Kapur, 2008. "Persistent Gaps and Default Traps," Birkbeck Working Papers in Economics and Finance 0803, Birkbeck, Department of Economics, Mathematics & Statistics.
  7. M. Ayhan Kose & Raymond Riezman, 1999. "Trade Shocks and Macroeconomic Fluctuations in Africa," CSGR Working papers series 43/99, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
  8. Fernandez-Arias, Eduardo & DEC, 1994. "The new wave of private capital inflows : push or pull?," Policy Research Working Paper Series 1312, The World Bank.
  9. Christopher Blattman & Jason Hwang & Jeffrey G. Williamson, 2004. "The Impact of the Terms of Trade on Economic Development in the Periphery, 1870-1939: Volatility and Secular Change," NBER Working Papers 10600, National Bureau of Economic Research, Inc.
  10. repec:cup:cbooks:9780521389044 is not listed on IDEAS
  11. Vahid, F & Engle, Robert F, 1993. "Common Trends and Common Cycles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 341-60, Oct.-Dec..
  12. Talvi, Ernesto & Vegh, Carlos A., 2005. "Tax base variability and procyclical fiscal policy in developing countries," Journal of Development Economics, Elsevier, vol. 78(1), pages 156-190, October.
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