U.S. Monetary Policy's Impact on Latin America's Structure of Production (1960-2010)

Latin American Journal of Economics 52.1:95-116 DOI: 10.7764/LAJE.52.1.95

26 Pages Posted: 12 Apr 2013 Last revised: 29 May 2015

See all articles by Nicolas Cachanosky

Nicolas Cachanosky

The University of Texas at El Paso; American Institute for Economic Research; UCEMA Friedman-Hayek Center for the Study of a Free Society

Date Written: July 9, 2014

Abstract

In this article, I study the effects of U.S. monetary policy on Latin America’s production structure prior to two recent economic crises. In particular, I study the effects of monetary policy on the real economy at the industrial level. I find that changes in the Federal Funds rate produce uneven effects on output trends across economic sectors. I find that industries that are more capital intensive and involved in relatively long-term projects are more sensitive to changes in the Federal Funds rate than industries that are less capital intensive and involved in relatively short-term projects. Therefore, periods of loose monetary policy result in a misallocation of resources that is costly to correct during a bust. This result finds a particular pattern of economic distortion during an unsustainable boom.

Keywords: international business cycles, monetary shocks, Latin America

JEL Classification: E32, F41

Suggested Citation

Cachanosky, Nicolas, U.S. Monetary Policy's Impact on Latin America's Structure of Production (1960-2010) (July 9, 2014). Latin American Journal of Economics 52.1:95-116 DOI: 10.7764/LAJE.52.1.95, Available at SSRN: https://ssrn.com/abstract=2248413 or http://dx.doi.org/10.2139/ssrn.2248413

Nicolas Cachanosky (Contact Author)

The University of Texas at El Paso

500 West University Avenue
El Paso, TX 79968
United States

HOME PAGE: http://https://www.utep.edu/

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

UCEMA Friedman-Hayek Center for the Study of a Free Society ( email )

Buenos Aires
Argentina

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