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Common Factors in Latin America's Business Cycles

Author

Listed:
  • Mr. Marco Aiolfi
  • Mr. Allan Timmermann
  • Mr. Luis Catão

Abstract

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.

Suggested Citation

  • Mr. Marco Aiolfi & Mr. Allan Timmermann & Mr. Luis Catão, 2006. "Common Factors in Latin America's Business Cycles," IMF Working Papers 2006/049, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2006/049
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    More about this item

    Keywords

    WP; real GDP; standard deviation; economic activity; government spending; Business Cycles; Factor Models; Latin America; business cycle volatility; shortening business cycle length; volatility in Latin America; time series; backcasted business cycle; density function; business cycle driver; Terms of trade; Economic recession; Global; Middle East; Africa; Asia and Pacific;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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