Common Factors in Latin America's Business Cycles

Allan Timmermann, Luis Catão () and Marco Aiolfi

No 2006/049, IMF Working Papers from International Monetary Fund

Abstract: This paper constructs new business cycle indices for Argentina, Brazil, Chile, and Mexico based on common dynamic factors extracted from a comprehensive set of sectoral output, external data, and fiscal and financial variables spanning over a century. The constructed indices are used to derive a business cycle chronology for these countries and characterize a set of new stylized facts. In particular, we show that all four countries have historically displayed a striking combination of high business cycle and persistence relative to benchmark countries, and that such volatility has been time-varying, with important differences across policy regimes. We also uncover a sizeable common factor across the four economies which has greatly limited scope for regional risk sharing.

Keywords: WP; real GDP; standard deviation; economic activity; government spending; Business Cycles; Factor Models; Latin America; business cycle volatility; shortening business cycle length; volatility in Latin America; time series; backcasted business cycle; density function; business cycle driver; Terms of trade; Economic recession; Global; Middle East; Africa; Asia and Pacific (search for similar items in EconPapers)
Pages: 64
Date: 2006-02-01
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Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Common factors in Latin America's business cycles (2011)
Working Paper: Common Factors in Latin America?s Business Cycles (2010)
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