Common Factors in Latin America's Business Cycles

By Allan Timmermann, Luis Catão, Marco Aiolfi

February 1, 2006

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Allan Timmermann, Luis Catão, and Marco Aiolfi. Common Factors in Latin America's Business Cycles, (USA: International Monetary Fund, 2006) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Business cycles, Econometric analysis, Economic growth, Economic recession, Expenditure, Factor models, International trade, Terms of trade

Keywords: Africa, Asia and Pacific, Backcasted business cycle, Business cycle driver, Business cycle volatility, Business Cycles, Density function, Economic activity, Economic recession, Factor Models, Global, Government spending, Latin America, Middle East, Real GDP, Shortening business cycle length, Standard deviation, Terms of trade, Time series, Volatility in Latin America, WP

Publication Details

Pages:

64
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/049
Stock No:

WPIEA2006049
ISBN:

9781451863093
ISSN:

1018-5941

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