Booms%20and%20Busts%20in%20Latin%20America%3A%20The%20Role%20of%20External%20Factors

Working Papers

Booms and Busts in Latin America: The Role of External Factors


CODE: WP-631
AUTHOR(s): Izquierdo, Alejandro , Romero, Randall , Talvi, Ernesto
PUBLISHED: February 2008
LANGUAGE: English
RELATED TOPICS: Macroeconomics
DOWNLOAD FILE IN: English

Abstract:

This paper analyzes the relevance of external factors in average quarterly GDP growth for 1990-2006 in the seven largest Latin American countries (LAC7). Modeling the relationship between LAC7 GDP and several external factors, it is found that those factors account for a significant share of variance in LAC7 GDP growth, and that external shocks produce significant responses. Likewise, a significant share of recent LAC7 growth performance can be explained by an external factor “tailwind.” Also evaluated is the impact of deterioration in external financial conditions. Finally, the relevance of these findings for policy evaluation is emphasized. Growth performance, the strength or weakness of macroeconomic fundamentals and the impact of domestic macro and micro policies on growth can only be properly appraised by first filtering out the effects of external factors.

Related Research by JEL Codes:
(or click here to find research by JEL Codes)
  • Systemic Sudden Stops: The Relevance of Balance-Sheet Effects and Financial Integration
    Working Papers
    WP-637 - July 2008

    Using a sample of 110 developed and developing countries for the period 1990-2004, this paper analyzes the characteristics of systemic sudden stops (3S) in capital flows and the relevance of balance-sheet effects in the likelihood of their materialization. A small supply of tradable goods relative to their domestic absorption?a proxy for potential changes in the real exchange rate?and large foreig ... (View publication)

  • Latin American and Caribbean Macroeconomic Report Routes to Growth in a New Trade World
    Annual Report
    IDB-AR-141 - March 2017

    The 2017 Macroreport considers recent developments in the global economy and how they may affect Latin America and the Caribbean. It reviews how countries are adapting to external conditions and how those policies may be improved. This year, the report focuses particularly on deeper and smarter regional integration as an attractive route to boost productivity and growth. (View publication)

  • Theoretical Background on External Sustainability Assessments
    Technical Notes
    IDB-TN-1096 - September 2016

    This paper explains in detail the external sustainability assessment approach given by the stock-flow relationship between the net external positions, non-income current account plus net capital transfers, and real exchange rate. This approach consists of determining the non-income current account over GDP that would stabilize a benchmark net foreign asset (NFA) position over the medium term, ... (View publication)

Hello, Welcome to the IDB!

Please join our mailing list by simply entering your email below.