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Title: Commodity prices and the business cycle in Latin America: Living and dying by commodities?

Author(s): Maximo Camacho and Gabriel Pérez-Quirós

Publication Date: February 2013

Keyword(s): Emerging Markets and Non linearities

Programme Area(s): International Macroeconomics

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.

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Bibliographic Reference

Camacho, M and Pérez-Quirós, G. 2013. 'Commodity prices and the business cycle in Latin America: Living and dying by commodities?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9367