Latin American falls, rebounds and tail risks
This paper proposes comprehensive measures of the Latin American business cycle
that help to infer the expected deepness of recessions, and strength of expansions, as
they unfold in real time. These measures are based on the largest country economies
in the region by accounting for intrinsic features of real activity, such as comovement,
nonlinearities, asymmetries, and are also robust to unprecedented shocks, like the
COVID-19 pandemics. The proposed measures provide timely updates on (i) inferences
on the state of the regional economy, (ii) the underlying momentum embedded
in short-term fluctuations of real activity, and (iii) the quantification of macroeconomic
tail risks. We evaluate as well the time-varying effects of U.S. financial conditions
on the Latin American economy by employing the proposed measures, and
identify periods of persistent international spillovers.
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Copyright (c) 2023 Luciano Campos
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