## Volatility and Growth in Latin America: An Episodic Approach

_IMF Working Papers, December 1, 2006_

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## Bibliographic details
- Authors: Ratna Sahay, Rishi Goyal
- Published: December 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451865479.001

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### Overview
- Compares the pattern of macroeconomic volatility in 17 Latin American countries during episodes of high and low growth since 1970.
- Examines in particular the role of policy volatility.
- Distinguishes macroeconomic outcomes from macroeconomic policies, structural reforms and reversals, shocks, and institutional constraints.
- Constructs a composite measure of structural reforms for the 1970-2004 period based on previous work.

### Methodology and Scope
- Sample: 17 Latin American countries.
- Timeframe: since 1970, with a composite structural reform measure for 1970-2004.
- Analytical focus: separating outcomes, policies, structural reforms/reversals, shocks (including U.S. interest rates), and institutional constraints.

### Key Findings
- Outcomes and policies are more volatile in low growth episodes.
- Shocks (except U.S. interest rates) are similar across high- and low-growth episodes.
- Fiscal policy volatility is associated with lower growth.
- Fiscal policy procyclicality is not associated with lower growth.
- Low levels of market-oriented reforms are associated with lower growth.
- Structural reform reversals are associated with lower growth.

### Policy Implications
- Reducing fiscal policy volatility could support higher growth.
- Stabilizing policy frameworks to avoid structural reform reversals may foster better long-run growth performance.
- Emphasizing sustained market-oriented reforms could be important for raising growth outcomes.

### Keywords and Subjects (as presented)
- Subjects: Currency crises, Exchange rate arrangements, Financial crises, Financial services, Fiscal policy, Foreign exchange, Macrostructural analysis, Real interest rates, Structural reforms
- Keywords: composite index, country authorities, country case studies, country policy, Currency crises, Episodic Approach, exchange rate, Exchange rate arrangements, Global, Growth, Latin America, Latin American country, long-run growth performance, real interest rate, Real interest rates, simple average, Structural Reforms, terms of trade, Volatility, WP

*Source: Volatility and Growth in Latin America: An Episodic Approach, Ratna Sahay and Rishi Goyal, IMF Working Paper No. 2006/287.*

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