IDEAS home Printed from https://ideas.repec.org/p/idb/wpaper/4569.html
   My bibliography  Save this paper

Booms and Busts in Latin America: The Role of External Factors

Author

Listed:
  • Alejandro Izquierdo

    ()

  • Randall Romero
  • Ernesto Talvi

Abstract

This paper analyzes the relevance of external factors in average quarterly GDP growth for 1990-2006 in the seven largest Latin American countries (LAC7). Modeling the relationship between LAC7 GDP and several external factors, it is found that those factors account for a significant share of variance in LAC7 GDP growth, and that external shocks produce significant responses. Likewise, a significant share of recent LAC7 growth performance can be explained by an external factor “tailwind. ” Also evaluated is the impact of deterioration in external financial conditions. Finally, the relevance of these findings for policy evaluation is emphasized. Growth performance, the strength or weakness of macroeconomic fundamentals and the impact of domestic macro and micro policies on growth can only be properly appraised by first filtering out the effects of external factors.

Suggested Citation

  • Alejandro Izquierdo & Randall Romero & Ernesto Talvi, 2008. "Booms and Busts in Latin America: The Role of External Factors," Research Department Publications 4569, Inter-American Development Bank, Research Department.
  • Handle: RePEc:idb:wpaper:4569
    as

    Download full text from publisher

    File URL: http://www.iadb.org/research/pub_hits.cfm?pub_id=WP-631&pub_file_name=pubWP-631.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-457, March.
    2. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    3. Guillermo A. Calvo & Alejandro Izquierdo & Ernesto Talvi, 2006. "Phoenix Miracles in Emerging Markets: Recovering without Credit from Systemic Financial Crises," Research Department Publications 4474, Inter-American Development Bank, Research Department.
    4. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148 Elsevier.
    5. Fabio Canova, 2005. "The transmission of US shocks to Latin America," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 229-251.
    6. Guillermo A. Calvo & Alejandro Izquierdo & Luis-Fernando Mejía, 2004. "On the empirics of Sudden Stops: the relevance of balance-sheet effects," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
    7. Guillermo A. Calvo, 1998. "Capital Flows and Capital-Market Crises: The Simple Economics of Sudden Stops," Journal of Applied Economics, Universidad del CEMA, vol. 1, pages 35-54, November.
    8. Lutz Kilian, 1998. "Small-Sample Confidence Intervals For Impulse Response Functions," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 218-230, May.
    9. Guillermo A. Calvo & Alejandro Izquierdo & Ernesto Talvi, 2002. "Sudden Stops, the Real Exchange Rate and Fiscal Sustainability: Argentina's Lessons," IDB Publications (Working Papers) 1909, Inter-American Development Bank.
    10. Reinhart, Carmen & Calvo, Guillermo, 2000. "When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options," MPRA Paper 6982, University Library of Munich, Germany.
    11. Guillermo A. Calvo & Ernesto Talvi, 2005. "Sudden Stop, Financial Factors and Economic Collpase in Latin America: Learning from Argentina and Chile," NBER Working Papers 11153, National Bureau of Economic Research, Inc.
    12. Marcel, Mario & Tokman R., Marcelo & Valdés, Rodrigo O. & Benavides, Paula, 2003. "Structural budget balance: methodology and estimation for the Chilean central government 1987-2001," Seminarios y Conferencias 6573, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:idb:wpaper:4569. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Felipe Herrera Library). General contact details of provider: http://edirc.repec.org/data/iadbbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.