Common Factors in Latin America's Business Cycles

39 Pages Posted: 8 Feb 2010

See all articles by Marco Aiolfi

Marco Aiolfi

QMA

Luis A. V. Catão

Inter American Development Bank

Allan Timmermann

UCSD ; Centre for Economic Policy Research (CEPR)

Date Written: January 2010

Abstract

We develop a common factor approach to reconstruct new business cycle indices for Argentina, Brazil, Chile, and Mexico ("LAC-4") from an unprecedentedly comprehensive dataset spanning 135 years. We establish the robustness of our indices through a variety of tests, use the indices to explore business cycle properties in LAC-4 and compare them with other countries across outward- and inward-looking policy regimes. We find that output persistence in LAC-4 has been consistently high across regimes, whereas volatility was strikingly high during the pre-1929 outward-looking regime but declined during the most recent shift towards greater openness. We also find a sizeable common regional factor driven by output and interest rates in advanced countries, including during inward-looking regimes

Keywords: factor models, International business cycles, Latin America

JEL Classification: E32, F41, N10

Suggested Citation

Aiolfi, Marco and Catão, Luis A. V. and Timmermann, Allan, Common Factors in Latin America's Business Cycles (January 2010). CEPR Discussion Paper No. DP7671. Available at SSRN: https://ssrn.com/abstract=1547610

Marco Aiolfi (Contact Author)

QMA ( email )

100 Mulberry Street
Gateway Center 2
Newark, NJ 07102
United States

Luis A. V. Catão

Inter American Development Bank ( email )

Allan Timmermann

UCSD ( email )

9500 Gilman Drive
La Jolla, CA 92093-0553
United States
858-534-0894 (Phone)

HOME PAGE: http://rady.ucsd.edu/people/faculty/timmermann/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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