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The contribution of domestic, regional, and international factors to Latin America’s business cycle

  • Melisso Boschi

    (University of Perugia and Centre for Applied Macroeconomic Analysis (CAMA))

  • Alessandro Girardi

    (ISAE - Institute for Studies and Economic Analyses and University of Rome Tor Vergata)

This paper quantifies the relative contribution of domestic, regional and international factors to the fluctuation of domestic output in six key Latin American (LA) countries: Argentina, Bolivia, Brazil, Chile, Mexico and Peru. Using quarterly data over the period 1980:1-2003:4, a multivariate, multi-country time series model was estimated to study the economic interdependence among LA countries and, in addition, between each of them and the three world largest industrial economies: the US, the Euro Area and Japan. Falsifying a common suspicion, it is shown that the proportion of LA countries’ domestic output variability explained by industrial countries’ factors is modest. By contrast, domestic and regional factors account for the main share of output variability at all simulation horizons. The implications for the choice of the exchange rate regime are also discussed.

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Paper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 105.

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Length: 36 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:isa:wpaper:105
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  10. Melisso Boschi, 2007. "Foreign capital in Latin America: A long-run structural Global VAR perspective," Economics Discussion Papers 647, University of Essex, Department of Economics.
  11. Aiolfi, Marco & Catão, Luis A. V. & Timmermann, Allan G, 2010. "Common Factors in Latin America’s Business Cycles," CEPR Discussion Papers 7671, C.E.P.R. Discussion Papers.
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  17. 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.
  18. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
  19. Alessandro Girardi & Paolo Paesani, 2008. "The Transfer Problem in the Euro Area," Open Economies Review, Springer, vol. 19(4), pages 517-537, September.
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  21. Agenor, Pierre-Richard & McDermott, C John & Prasad, Eswar S, 2000. "Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts," World Bank Economic Review, World Bank Group, vol. 14(2), pages 251-85, May.
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  24. Ahmed, Shaghil, 2003. "Sources of economic fluctuations in Latin America and implications for choice of exchange rate regimes," Journal of Development Economics, Elsevier, vol. 72(1), pages 181-202, October.
  25. Johansen, Soren, 1992. "Determination of Cointegration Rank in the Presence of a Linear Trend," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 383-97, August.
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