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Common Factors in Latin America's Business Cycles

Listed author(s):
  • Allan Timmermann
  • Luis Catão
  • Marco Aiolfi

This paper constructs new business cycle indices for Argentina, Brazil, Chile, and Mexico based on common dynamic factors extracted from a comprehensive set of sectoral output, external data, and fiscal and financial variables spanning over a century. The constructed indices are used to derive a business cycle chronology for these countries and characterize a set of new stylized facts. In particular, we show that all four countries have historically displayed a striking combination of high business cycle and persistence relative to benchmark countries, and that such volatility has been time-varying, with important differences across policy regimes. We also uncover a sizeable common factor across the four economies which has greatly limited scope for regional risk sharing.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/49.

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Length: 64
Date of creation: 01 Feb 2006
Handle: RePEc:imf:imfwpa:06/49
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