The Effect of External Conditions on Growth in Latin America

38 Pages Posted: 23 Aug 2007

See all articles by Pär Österholm

Pär Österholm

International Monetary Fund (IMF)

Jeromin Zettelmeyer

Peter G. Peterson Institute for International Economics; CEPR

Date Written: July 2007

Abstract

This paper investigates the sensitivity of Latin American GDP growth to external developments using a Bayesian VAR model with informative steady-state priors. The model is estimated on quarterly data from 1994 to 2006 on key external and Latin American variables. It finds that 50 to 60 percent of the variation in Latin American GDP growth is accounted for by external shocks. Conditional forecasts for a variety of external scenarios suggest that Latin American growth is robust to moderate declines in commodity prices and U.S. or world growth, but sensitive to more extreme shocks, particularly a combined external slowdown and tightening of world financial conditions.

Keywords: Working Paper, Latin America, Economic growth, Business cycles, Economic growth, Commodity prices

Suggested Citation

Österholm, Pär and Zettelmeyer, Jeromin, The Effect of External Conditions on Growth in Latin America (July 2007). IMF Working Papers, Vol. , pp. 1-36, 2007. Available at SSRN: https://ssrn.com/abstract=1007925

Pär Österholm (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jeromin Zettelmeyer

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

CEPR ( email )

London
United Kingdom

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