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Cuban macroeconomic trends 1985 - 2013, external shocks and policy

Author

Listed:
  • Pavel Vidal Alejandro

    () (Faculty of Economics and Management, Pontificia Universidad Javeriana Cali)

Abstract

The paper focuses on analyzing the leading macroeconomic trends and policies in Cuba from 1985-2013. Five macroeconomic indexes were estimated using dynamic factor models. The correlations between the estimated indexes and the GDP growth rate show that, on average, fiscal policy was procyclical while monetary policy was countercyclical. Econometric simulations confirmed the economy’s high vulnerability to an eventual collapse of relations with Venezuela; it would cause GDP to contract by about 10% over three years. The analysis also suggests that pending monetary reforms could create negative pressure on goods production and on households’ living conditions, which could not be mitigated by an expansionary fiscal policy. Instead, the negative effects of such shocks can be mitigated only through greater international openness; this is a more feasible objective. given the current situation of diminishing tensions with the US government.

Suggested Citation

  • Pavel Vidal Alejandro, 2017. "Cuban macroeconomic trends 1985 - 2013, external shocks and policy," Working Papers 28, Faculty of Economics and Management, Pontificia Universidad Javeriana Cali.
  • Handle: RePEc:ddt:wpaper:28
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    File URL: ftp://repec.javerianacali.edu.co/WorkingPapers/ddtn282017.pdf
    File Function: First version, 2017
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    More about this item

    Keywords

    Cuba; Reform; Macroeconomics; Dynamic Factor Model; Monetary Policy;

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • P24 - Economic Systems - - Socialist Systems and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation

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