Working Paper: CEPR ID: DP9367
Authors: Maximo Camacho; Gabriel Prezquirs
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; Nonlinearities
JEL Codes: E32; F43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Commodity Price Shocks (Q02) | Output Growth (O40) |
| Positive Commodity Price Shocks (Q02) | Output Growth (O40) |
| Negative Commodity Price Shocks (Q02) | Output Growth (O40) |
| Commodity Price Shocks During Recessions (Q02) | Output Growth (O40) |
| Commodity Price Shocks During Expansions (E39) | Output Growth (O40) |
| Commodity Price Shocks (Q02) | Regime Shifts (P39) |