Weak Expansions: A Distinctive Feature of the Business Cycle in Latin America and the Caribbean
Using two standard cycle methodologies (classical and deviation cycle) and a comprehensive sample of 83 countries worldwide, including all developing regions, we show that the Latin American and Caribbean cycle exhibits two distinctive features. First, and most important, its expansion performance is shorter and, for the most part, less intense than that of the rest of the regions considered; in particular, that of East Asia and the Pacific. East Asia's and the Pacific's expansions last five years longer than those of Latin American and the Caribbean, and its output gain is 50 percent greater. Second, the Latin American and Caribbean region tends to exhibit contractions that are not significantly different from those other regions in terms of duration and amplitude. Both these features imply that the complete Latin American and Caribbean cycle has, overall, the shortest duration and smallest amplitude in relation to other regions. The specificities of the Latin American and Caribbean cycle are not confined to the short run. These are also reflected in variables such as productivity and investment, which are linked to long-run growth. East Asia's and the Pacific's cumulative gain in labor productivity during the expansionary phase is twice that of Latin American and the Caribbean. Moreover, the evidence also shows that the effects of the contraction in public investment surpass those of the expansion, leading to a declining trend over the entire cycle. In this sense, we suggest that policy analysis needs to increase its focus on the expansionary phase of the cycle. Improving our knowledge of the differences in the expansionary dynamics of countries and regions can further our understanding of the differences in their rates of growth and levels of development. We also suggest that, while the management of the cycle affects the short-run fluctuations of economic activity and therefore volatility, it is not trend neutral. Hence, the effects of aggregate demand management policies may be more persistent over time, and less transitory, than currently thought.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rand, John & Tarp, Finn, 2002.
"Business Cycles in Developing Countries: Are They Different?,"
Elsevier, vol. 30(12), pages 2071-2088, December.
- Rand, John & Tarp, Finn, 2001. "Business Cycles in Developing Countries: Are They Different?," MPRA Paper 62445, University Library of Munich, Germany.
- Adrian Pagan & Don Harding, 2005. "A suggested framework for classifying the modes of cycle research," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 151-159.
- Michael Artis & Massimiliano Marcellino & Tommaso Proietti, 2003.
"Dating the Euro Area Business Cycle,"
237, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Artis, Michael J & Marcellino, Massimiliano & Proietti, Tommaso, 2003. "Dating the Euro Area Business Cycle," CEPR Discussion Papers 3696, C.E.P.R. Discussion Papers.
- Michael ARTIS & Massimiliano MARCELLINO & Tommaso PROIETTI, 2002. "Dating the Euro Area Business Cycle," Economics Working Papers ECO2002/24, European University Institute.
- Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_71-1, October.
- Calderon, Cesar & Fuentes, Rodrigo, 2010.
"Characterizing the business cycles of emerging economies,"
Policy Research Working Paper Series
5343, The World Bank.
- César Calderón & Rodrigo Fuentes., 2011. "Characterizing the Business Cycles of Emerging Economies," Documentos de Trabajo 371, Instituto de Economia. Pontificia Universidad Católica de Chile..
- Rachel Male, 2010. "Developing Country Business Cycles: Characterising the Cycle," Working Papers 663, Queen Mary University of London, School of Economics and Finance.
- Gerhard Bry & Charlotte Boschan, 1971. "Foreword to "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs"," NBER Chapters, in: Cyclical Analysis of Time Series: Selected Procedures and Computer Programs, pages -1 National Bureau of Economic Research, Inc.
- Stan du Plessis, 2006. "Business Cycles in Emerging market Economies: A New View of the Stylised Facts," Working Papers 02/2006, Stellenbosch University, Department of Economics.
- Harding, Don & Pagan, Adrian, 2002.
"Dissecting the cycle: a methodological investigation,"
Journal of Monetary Economics,
Elsevier, vol. 49(2), pages 365-381, March.
- Don Harding & Adrian Pagan, 2000. "Disecting the Cycle: A Methodological Investigation," Econometric Society World Congress 2000 Contributed Papers 1164, Econometric Society.
- Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number zarn92-1, October.
- Paul Cashin, 2004. "Caribbean Business Cycles," IMF Working Papers 04/136, International Monetary Fund.
- Stefano Zambelli, 2007. "A Rocking Horse That Never Rocked: Frisch's “Propagation Problems and Impulse Problems”," History of Political Economy, Duke University Press, vol. 39(1), pages 145-166, Spring.
- Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, October.
- Harding, Don & Pagan, Adrian, 2003. "A comparison of two business cycle dating methods," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1681-1690, July.
- Harding, Don & Pagan, Adrian, 2003. "Rejoinder to James Hamilton," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1695-1698, July.
- Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, June.
When requesting a correction, please mention this item's handle: RePEc:lev:wrkpap:wp_749. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Celeste Edwards)
If references are entirely missing, you can add them using this form.