The Contribution of Domestic, Regional and International Factors to Latin America's Business Cycle
University of Rome 3; Centre for Applied Macroeconomic Analysis (CAMA)
National Institute of Statistics (ISTAT)
CAMA Working Paper No. 33/2008
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 multi-variate, multicountry 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.
Number of Pages in PDF File: 31
Keywords: International business cycle, Latin America, exchange rate regimes, Global VAR methodology, VECM
JEL Classification: C32, E32, F31, F41working papers series
Date posted: November 9, 2008 ; Last revised: December 19, 2008
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