32 Pages Posted: 24 Mar 2008
Date Written: February 2008
The economies of Central America share a close relationship with the United States, with considerable comovement of GDP growth over a long period of time. Trade, the financial sector, and remittance flows are all potential channels through which the U.S. cycle could affect the region. But just how dependent is growth in the region on the U.S.? Using the common cycles method of Vahid and Engle (1993), this paper suggests that the business cycle is dominated by the U.S.; region-specific growth drivers tend to be long-lasting shocks, rather than temporary fluctuations. The most cyclically sensitive countries include Costa Rica, El Salvador, and Honduras.
Keywords: Economic integration, Central America, Costa Rica, El Salvador, Honduras, Trade, United States, Financial sector, Salary remittances
Suggested Citation: Suggested Citation
Roache, Shaun K., Central America's Regional Trends and U.S. Cycles (February 2008). IMF Working Papers, Vol. , pp. 1-30, 2008. Available at SSRN: https://ssrn.com/abstract=1112152