The Effect of External Conditions on Growth in Latin America

Author/Editor:

Jeronimo Zettelmeyer ; Pär Österholm

Publication Date:

July 1, 2007

Electronic Access:

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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 investigates the sensitivity of Latin American GDP growth to external developments using a Bayesian VAR model with informative steady-state priors. The model is estimated on quarterly data from 1994 to 2006 on key external and Latin American variables. It finds that 50 to 60 percent of the variation in Latin American GDP growth is accounted for by external shocks. Conditional forecasts for a variety of external scenarios suggest that Latin American growth is robust to moderate declines in commodity prices and U.S. or world growth, but sensitive to more extreme shocks, particularly a combined external slowdown and tightening of world financial conditions.

Series:

Working Paper No. 07/176

Subject:

English

Publication Date:

July 1, 2007

ISBN/ISSN:

9781451867404/1018-5941

Stock No:

WPIEA2007176

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

36

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