Commodity Prices and the Business Cycle in Latin America: Living and Dying by Commodities?

45 Pages Posted: 26 Feb 2013

See all articles by Maximo Camacho

Maximo Camacho

Autonomous University of Barcelona - Department of Economics; Universidad de Murcia - Departamento de Metodos Cuantitativos

Gabriel Pérez-Quirós

Banco de España

Date Written: February 2013

Abstract

We analyze the dynamic interactions between commodity prices and output growth of the seven greatest exporters Latin American countries: Argentina, Brazil, Colombia, Chile, Mexico, Peru and Venezuela. Using a novel definition of Markov-switching impulse response functions, we find that the responses of their respective output growths to commodity price shocks are time dependent, size dependent and sign dependent. Overall, the major evidence of asymmetries in output growth responses occurs when commodity price shocks lead to regime shifts. Accordingly, we consider that the design of optimal counter-cyclical stabilization policies in this region should take into account that the reactions of the economic activity vary considerably across business cycle regimes.

Keywords: Emerging Markets, Non linearities

JEL Classification: E32, F43

Suggested Citation

Camacho, Maximo and Pérez-Quirós, Gabriel, Commodity Prices and the Business Cycle in Latin America: Living and Dying by Commodities? (February 2013). CEPR Discussion Paper No. DP9367, Available at SSRN: https://ssrn.com/abstract=2224292

Maximo Camacho (Contact Author)

Autonomous University of Barcelona - Department of Economics ( email )

Avda. Diagonal 690
Barcelona, 08034
Spain

Universidad de Murcia - Departamento de Metodos Cuantitativos ( email )

Campus de Espinardo
30100 Murcia
Spain
+34 968 367 982 (Phone)

Gabriel Pérez-Quirós

Banco de España

Alcala 50
Madrid 28014
Spain

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