Volatility and Growth in Latin America: An Episodic Approach

54 Pages Posted: 9 Jan 2007

See all articles by Rishi Goyal

Rishi Goyal

International Monetary Fund (IMF)

Ratna Sahay

International Monetary Fund (IMF) - Developing Country Studies Division; National Bureau of Economic Research (NBER)

Date Written: Janurary 2007

Abstract

This paper compares the pattern of macroeconomic volatility in 17 Latin American countries during episodes of high and low growth since 1970, examining in particular the role of policy volatility. Macroeconomic outcomes are distinguished from macroeconomic policies, structural reforms and reversals, shocks, and institutional constraints. Based on previous work, a composite measure of structural reforms is constructed for the 1970-2004 period. We find that outcomes and policies are more volatile in low growth episodes, while shocks (except U.S. interest rates) are similar across episodes. Fiscal policy volatility is associated with lower growth, but fiscal policy procyclicality is not. Low levels of market-oriented reforms and structural reform reversals are also associated with lower growth.

Keywords: Growth, Volatility, Structural Reforms, Latin America, Episodic Approach

JEL Classification: C40, E63, N16

Suggested Citation

Goyal, Rishi and Sahay, Ratna, Volatility and Growth in Latin America: An Episodic Approach (Janurary 2007). IMF Working Paper No. 06/287, Available at SSRN: https://ssrn.com/abstract=955974

Rishi Goyal (Contact Author)

International Monetary Fund (IMF) ( email )

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Washington, DC 20431
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Ratna Sahay

International Monetary Fund (IMF) - Developing Country Studies Division ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-7181 (Phone)
202-623-7271 (Fax)

National Bureau of Economic Research (NBER)

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