Output gaps and stabilisation policies in Latin America: The effect of commodity and capital flow cycles

Enrique Alberola, Rocio Gondo Mori, Marco Lombardi and Diego Urbina
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Diego Urbina: Bank for International Settlements, Switzerland and Mexico

Revista ESPE - Ensayos sobre Política Económica, 2017, vol. 35, issue 82, No 82, 40-52

Abstract: We provide a measure of the output gap that filters out the impact of the commodity and net capital inflows booms for Latin American countries. These two factors temporarily boost output and so are likely to push up estimates of potential growth in the region to unrealistic levels, thereby resulting in an underestimation of the output gaps during the upswing of the commodity cycle. We also shed light on the interaction between the two components. The results show that commodity prices have been the dominant factor explaining deviation of activity from sustainable levels. A timely consideration of these factors could prevent a procyclical fiscal policy bias in the region.

Keywords: Brecha de producción; Precio de las materias primas; Flujos de Capital; Prociclicidad; Política fiscal; Latinoamérica (search for similar items in EconPapers)
JEL-codes: E32 E62 F32 O43 Q33 (search for similar items in EconPapers)
Date: 2017
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https://doi.org/10.1016/j.espe.2016.11.003

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Journal Article: Output gaps and stabilisation policies in Latin America: The effect of commodity and capital flow cycles (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:ensayo:v:35:y:2017:i:82:p:40-52

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