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Central America’s Regional Trends and U.S. Cycles

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  • Shaun K. Roache

Abstract

The economies of Central America share a close relationship with the United States, with considerable comovement of GDP growth over a long period of time. Trade, the financial sector, and remittance flows are all potential channels through which the U.S. cycle could affect the region. But just how dependent is growth in the region on the U.S.? Using the common cycles method of Vahid and Engle (1993), this paper suggests that the business cycle is dominated by the U.S.; region-specific growth drivers tend to be long-lasting shocks, rather than temporary fluctuations. The most cyclically sensitive countries include Costa Rica, El Salvador, and Honduras.

Suggested Citation

  • Shaun K. Roache, 2008. "Central America’s Regional Trends and U.S. Cycles," IMF Working Papers 08/50, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/50
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    References listed on IDEAS

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    Cited by:

    1. Yan M Sun & Wendell A. Samuel, 2009. "ECCU Business Cycles; Impact of the U.S," IMF Working Papers 09/71, International Monetary Fund.
    2. Magnusson, Kristin, 2009. "The Impact of U.S. Regional Business Cycles on Remittances to Latin America," SSE/EFI Working Paper Series in Economics and Finance 710, Stockholm School of Economics.
    3. Carlos Eduardo Castillo-Maldonado & Fidel Pérez-Macal, 2013. "Assessment of models to forecast exchange rates: The quetzal–U.S. dollar exchange rate," Journal of Applied Economics, Universidad del CEMA, vol. 16, pages 71-99, May.
    4. Gould, David & Loening, Josef L., 2008. "Central America's Macroeconomic Environment and the Role of the Investment Climate under Free Trade," MPRA Paper 25896, University Library of Munich, Germany.

    More about this item

    Keywords

    Financial sector; El Salvador; Central America; Costa Rica; Honduras; Salary remittances; Trade; United States; business fluctuations; cycles; linkages; common; correlations; correlation; statistics; cointegration;

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