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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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