The Contribution of Domestic, Regional and International Factors to Latin America's Business Cycle

CAMA Working Paper No. 33/2008

31 Pages Posted: 9 Nov 2008 Last revised: 19 Dec 2008

See all articles by Melisso Boschi

Melisso Boschi

Centre for Applied Macroeconomic Analysis (CAMA); Senate of the Republic of Italy

Alessandro Girardi

National Institute of Statistics (ISTAT)

Date Written: October 2008

Abstract

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.

Keywords: International business cycle, Latin America, exchange rate regimes, Global VAR methodology, VECM

JEL Classification: C32, E32, F31, F41

Suggested Citation

Boschi, Melisso and Boschi, Melisso and Girardi, Alessandro, The Contribution of Domestic, Regional and International Factors to Latin America's Business Cycle (October 2008). CAMA Working Paper No. 33/2008, Available at SSRN: https://ssrn.com/abstract=1298079 or http://dx.doi.org/10.2139/ssrn.1298079

Melisso Boschi (Contact Author)

Centre for Applied Macroeconomic Analysis (CAMA) ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

Senate of the Republic of Italy ( email )

Rome
Italy

Alessandro Girardi

National Institute of Statistics (ISTAT) ( email )

Via Cesare Balbo 16
00184 Rome, 0185
Italy

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