Esteban Pérez-Caldentey - Academia.edu (original) (raw)

Papers by Esteban Pérez-Caldentey

Research paper thumbnail of Un fondo de reservas regional para América Latina

En este documento se analiza la viabilidad, las implicancias y los desafíos de ampliar el Fondo L... more En este documento se analiza la viabilidad, las implicancias y los desafíos de ampliar el Fondo Latinoamericano de Reservas (flar) a la Argentina, el Brasil, Chile, México y el Paraguay. Se argumenta que un fondo regional de reservas debe concebirse como parte de una red amplia de mecanismos aportados por la arquitectura financiera internacional, para enfrentar problemas de balanza de pagos. Se plantea que un fondo de entre 9.000 y 10.000 millones de dólares permitiría cubrir las necesidades potenciales de financiamiento de sus miembros bajo escenarios de mayor posibilidad de ocurrencia, sin que necesariamente debiera actuar como prestamista de última instancia para todos los países integrantes. Respecto de escenarios más extremos, el fondo debería poder "ampliar sus espaldas" mediante otras instancias de la arquitectura financiera. Los mayores desafíos de aumentar la cantidad de sus miembros se plantean en términos de la gobernanza que tendría este fondo regional de reservas.

Research paper thumbnail of The Latin American experience in pension system reform: Coverage, fiscal issues and possible implications for China

In the past two decades, Latin American countries reformed their pension systems focusing mainly ... more In the past two decades, Latin American countries reformed their pension systems focusing mainly on addressing the weaknesses of the contributory schemes -fiscal unsustainability, low coverage levels and a high degree of segmentation-and barely addressed the non-contributory element. The reform experiences show however that the intended reforms did not manage to meet their objectives. Firstly, to this day, a large proportion of the population remains inadequately covered by the contributory system. Secondly, the fiscal performance and outcome of the reform was worse than originally planned. The possibilities for the success of these reforms faced several constraints of a structural nature that are independent of the pension system itself and that as a result can not be overcome by a pension reform including mainly the limited savings capacity of some population groups and the instability and precariousness of the labor markets in the region. The Latin American experience shares similarities with that of China in terms of coverage, labor market informality. Both cases attest to the importance of combining contributory and non-contributory components in pension reform design.

Research paper thumbnail of Pension System Reform in Latin America and Potential Implications for the Chinese Case

In the past two decades, Latin American countries reformed their pension systems focusing mainly ... more In the past two decades, Latin American countries reformed their pension systems focusing mainly on addressing the weaknesses of the contributory schemes-fiscal unsustainability, low coverage levels and a high degree of segmentation-and barely addressed the non-contributory element. Thus, the reforms have failed to meet their objectives. Firstly, to this day, a large proportion of the population remains inadequately covered by the contributory system. Secondly, the fiscal outcome of the reform was worse than originally planned. Structural constraints such as the limited savings capacity of some population groups and the instability and precariousness of the labour markets in the region ensured that the pension reform would be unsuccessful. The Latin American experience shares similarities with that of China in terms of coverage and labour market informality. Both cases attest to the importance of combining contributory and non-contributory components in pension reform design. H 55; H 53

Research paper thumbnail of Un fondo de reservas regional para América Latina

Revista de la CEPAL, 2014

Research paper thumbnail of Institutions, Globalisation and Empowerment, by Kartik C. Roy and Jörn Sideras

Eastern Economic Journal, 2008

... Institutions, Globalisation and Empowerment, by Kartik C. Roy and Jörn Sideras. ... These inc... more ... Institutions, Globalisation and Empowerment, by Kartik C. Roy and Jörn Sideras. ... These include gender issues (United States, India, and Kenya), economic reform (Australia, Europe, Latin America, Russia, and Saudi Arabia), and firm structure (China, Hong Kong, and Taiwan). ...

Research paper thumbnail of Economists in Cambridge: a Study through their Correspondence, 1907 1946

Contributions to Political Economy, 2007

... Fabio Ranchetti is Professor of Economics at the University of Pisa, Italy. ... us in our res... more ... Fabio Ranchetti is Professor of Economics at the University of Pisa, Italy. ... us in our research: Katia Caldari, Alessandra Caretta, Claudia Cicconi, Maureen Donegan, Maria Teresa Duda, Christian Galassi, Monica Gentile, Martina Mosco, Cristina Saggioro, Iolanda Sanfilippo ...

Research paper thumbnail of Money and generalized exchange: A critical look at Neo-Walrasian theory1

Investigación Económica, 2015

The proof of existence of market clearing equilibrium is the cornerstone of Neo-Classical theory.... more The proof of existence of market clearing equilibrium is the cornerstone of Neo-Classical theory. While it is generally portrayed as a barter framework, the proof actually assumes an accepted system of credits and debits; a system of privately issued IOU's, or what is the same thing commitments by private agents to deliver a certain quantity of a given commodity at a given equilibrium price. In other words, the proof presupposes the existence of 'inside money'. Yet a system of generalized exchange with pure inside money is not compatible with the main principles of Neo-Classical monetary theory including that inflation is always and everywhere a monetary phenomenon, the exogeneity of money and also the neutrality of money. This explains the importance and necessity of introducing outside money in general equilibrium. Focussing mainly on Patinkin's 'invalid dichotomy' and the real balance effect, and to a lesser extent, on overlapping generation models, I try to show that these attempts have been unsuccessful. In both cases the integration of monetary and value theory amount to collapsing all individuals into a single one. This negates the very economic problem (i.e., multiple exchanges) that gave rise to general equilibrium theory and to the impending requirement to prove the existence of market clearing equilibrium.

Research paper thumbnail of Una lectura crítica de ‘la lectura crítica’ de la Ley de Thirlwall

Investigación Económica, 2015

Research paper thumbnail of The US-Central America-Dominican Republic Free Trade Agreement (CAFTA): Issues, Implications and Lessons for the Smaller Economies of Latin America …

This paper examines selected issues, implications and lessons of the United States-Central Americ... more This paper examines selected issues, implications and lessons of the United States-Central American Free Trade Agreement between the Central American Countries, the Dominican Republic and the United States. The paper argues that CAFTA will solidify the existing export specialization of the Central American countries and the Dominican Republic, which is mainly based on assembly plant products. The current export specialization has weak linkages with both internal and external demand, and therefore, is most likely not bound to improve growth prospects. In addition, CAFTA is part of a "new breed" of free trade agreements whose main goal is to subordinate trade policy to the dictates of the free market, which therefore significantly narrow the scope for public policy intervention.

Research paper thumbnail of issues and possible implications for China

In the past two decades, Latin American countries reformed their pension systems focusing mainly ... more In the past two decades, Latin American countries reformed their pension systems focusing mainly on addressing the weaknesses of the contributory schemes -fiscal unsustainability, low coverage levels and a high degree of segmentation-and barely addressed the non-contributory element. The reform experiences show however that the intended reforms did not manage to meet their objectives. Firstly, to this day, a large proportion of the population remains inadequately covered by the contributory system. Secondly, the fiscal performance and outcome of the reform was worse than originally planned. The possibilities for the success of these reforms faced several constraints of a structural nature that are independent of the pension system itself and that as a result can not be overcome by a pension reform including mainly the limited savings capacity of some population groups and the instability and precariousness of the labor markets in the region. The Latin American experience shares similarities with that of China in terms of coverage, labor market informality. Both cases attest to the importance of combining contributory and non-contributory components in pension reform design.

Research paper thumbnail of Can balance-of-payments constrained economies pursue inflation targeting?. A look at the case of Chile

Caribbean (ECLAC), Santiago, Chile, esteban.perez@eclac.org. The opinions here expressed are th... more Caribbean (ECLAC), Santiago, Chile, <esteban.perez@eclac.org>. The opinions here expressed are the authors' own and may not coincide with those of the institutions with which he is affiliated. Ramon Pineda provided useful suggestions to improve an earlier version of this paper.

Research paper thumbnail of The U.S.Central America-Dominican Republic Free Trade Agreement (CAFTA): Issues, Implications and Lessons for the Smaller Economies of Latin America and the Caribbean

This paper examines selected issues, implications and lessons of the United States-Central Americ... more This paper examines selected issues, implications and lessons of the United States-Central American Free Trade Agreement between the Central American Countries, the Dominican Republic and the United States. The paper argues that CAFTA will solidify the existing export specialization of the Central American countries and the Dominican Republic, which is mainly based on assembly plant products. The current export specialization

Research paper thumbnail of Trade openness, financial liberalization and volatility The Latin American experience

networkideas.org

Page 1. Trade openness, financial liberalization and volatility The Latin American experienceEste... more Page 1. Trade openness, financial liberalization and volatility The Latin American experienceEsteban Pérez Caldentey1 Introduction ... See, Williamson (1990). Page 2. 2 The main event that produced this change was the debt crisis and its effects on Latin American economies. ...

Research paper thumbnail of Harrod's interwar papers and correspondence: a review essay

Http Dx Doi Org 10 1080 09538250600915766, Jan 23, 2007

ABSTRACT This essay reviews Daniele Besomi&#39;s recently published three-volume collection o... more ABSTRACT This essay reviews Daniele Besomi&#39;s recently published three-volume collection of Roy F. Harrod&#39;s interwar correspondence and writings.

Research paper thumbnail of Strategies of “industrialization by invitation” in the Caribbean

Routledge Studies in Development Economics, 2007

Research paper thumbnail of ¿Pueden las economías con restricción de balanza de pagos perseguir metas de inflación? Un examen del caso Chileno

Investigación económica / Escuela Nacional de Economía, Universidad Nacional Autónoma de México

The current international financial system is anchored on the United States dollar. Countries tha... more The current international financial system is anchored on the United States dollar. Countries that do not issue the reserve currency must be able to acquire, and indeed accumulate, the currency they cannot issue to carry real and financial transactions. As a result, their external performance shapes and constrains to a significant extent their capacity to pursue domestic policies including fiscal and monetary policies. In this sense countries are said to be 'balance–of–payments' constrained. This paper examines, for the case of Chile, the limitations imposed by external conditions to the undertaking of a monetary policy strategy, inflation targeting, which focuses explicitly on a domestic objective, namely a low and stable rate of inflation. Chile adopted an inflation targeting strategy in 1991. Since, the adoption of the inflation targeting strategy followed two clear and distinct phases. The first one lasted from 1991 to 1999 and can be termed an Eclectic Inflation Targeti...

Research paper thumbnail of Sistemas de Pago en América Latina

Research paper thumbnail of Chicago, Keynes and Fiscal Policy

During the first half of the 1930's, the founders of the Chicago School of economics and John May... more During the first half of the 1930's, the founders of the Chicago School of economics and John Maynard Keynes in England advocated public works and as a cure for unemployment and a way to overcome the Great Depression. Counter cyclical fiscal policy was seen as a feasible strategy to attenuate the phases of the economic cycle. The quantity theory of money coupled with the hypothesis of wage and price rigidity provided the theoretical underpinnings for this policy proposal. These economists argued that a m onetary policy channeled through the banking system was ineffective. In particular, Chicago economists identified two key features that exemplified this restriction: the instability of the circulation velocity of money and the fragility and underdevelopment of the banking system and financial structure. Fiscal policy was thus advocated on the basis of market rigidities and the impotency of monetary policy.

Research paper thumbnail of The Concept and Evolution of the Developmental State

International Journal of Political Economy, 2008

Page 1. 27 Esteban Pérez Caldentey is an Economic Affairs Officer at the Economic Commission for ... more Page 1. 27 Esteban Pérez Caldentey is an Economic Affairs Officer at the Economic Commission for Latin America and the Caribbean (ECLAC) in Santiago, Chile. ... DOI 10.2753/IJP0891-1916370302 ESTEBAN PÉREZ CALDENTEY The Concept and Evolution of the ...

Research paper thumbnail of Weak Expansions: A Distinctive Feature of the Business Cycle in Latin America and the Caribbean

World Economic Review, 2014

ABSTRACT Using two standard cycle methodologies (classical and deviation cycle) and a comprehensi... more ABSTRACT Using two standard cycle methodologies (classical and deviation cycle) and a comprehensive sample of 83 countries worldwide, including all developing regions, we show that the Latin American and Caribbean cycle exhibits two distinctive features. First, and most important, its expansion performance is shorter and, for the most part, less intense than that of the rest of the regions considered; in particular, that of East Asia and the Pacific. East Asia’s and the Pacific’s expansions last five years longer than those of Latin American and the Caribbean, and its output gain is 50 percent greater. Second, the Latin American and Caribbean region tends to exhibit contractions that are not significantly different from those other regions in terms of duration and amplitude. Both these features imply that the complete Latin American and Caribbean cycle has, overall, the shortest duration and smallest amplitude in relation to other regions. The specificities of the Latin American and Caribbean cycle are not confined to the short run. These are also reflected in variables such as productivity and investment, which are linked to long-run growth. East Asia’s and the Pacific’s cumulative gain in labor productivity during the expansionary phase is twice that of Latin American and the Caribbean. Moreover, the evidence also shows that the effects of the contraction in public investment surpass those of the expansion, leading to a declining trend over the entire cycle. In this sense, we suggest that policy analysis needs to increase its focus on the expansionary phase of the cycle. Improving our knowledge of the differences in the expansionary dynamics of countries and regions can further our understanding of the differences in their rates of growth and levels of development. We also suggest that, while the management of the cycle affects the short-run fluctuations of economic activity and therefore volatility, it is not trend neutral. Hence, the effects of aggregate demand management policies may be more persistent over time, and less transitory, than currently thought.

Research paper thumbnail of Un fondo de reservas regional para América Latina

En este documento se analiza la viabilidad, las implicancias y los desafíos de ampliar el Fondo L... more En este documento se analiza la viabilidad, las implicancias y los desafíos de ampliar el Fondo Latinoamericano de Reservas (flar) a la Argentina, el Brasil, Chile, México y el Paraguay. Se argumenta que un fondo regional de reservas debe concebirse como parte de una red amplia de mecanismos aportados por la arquitectura financiera internacional, para enfrentar problemas de balanza de pagos. Se plantea que un fondo de entre 9.000 y 10.000 millones de dólares permitiría cubrir las necesidades potenciales de financiamiento de sus miembros bajo escenarios de mayor posibilidad de ocurrencia, sin que necesariamente debiera actuar como prestamista de última instancia para todos los países integrantes. Respecto de escenarios más extremos, el fondo debería poder "ampliar sus espaldas" mediante otras instancias de la arquitectura financiera. Los mayores desafíos de aumentar la cantidad de sus miembros se plantean en términos de la gobernanza que tendría este fondo regional de reservas.

Research paper thumbnail of The Latin American experience in pension system reform: Coverage, fiscal issues and possible implications for China

In the past two decades, Latin American countries reformed their pension systems focusing mainly ... more In the past two decades, Latin American countries reformed their pension systems focusing mainly on addressing the weaknesses of the contributory schemes -fiscal unsustainability, low coverage levels and a high degree of segmentation-and barely addressed the non-contributory element. The reform experiences show however that the intended reforms did not manage to meet their objectives. Firstly, to this day, a large proportion of the population remains inadequately covered by the contributory system. Secondly, the fiscal performance and outcome of the reform was worse than originally planned. The possibilities for the success of these reforms faced several constraints of a structural nature that are independent of the pension system itself and that as a result can not be overcome by a pension reform including mainly the limited savings capacity of some population groups and the instability and precariousness of the labor markets in the region. The Latin American experience shares similarities with that of China in terms of coverage, labor market informality. Both cases attest to the importance of combining contributory and non-contributory components in pension reform design.

Research paper thumbnail of Pension System Reform in Latin America and Potential Implications for the Chinese Case

In the past two decades, Latin American countries reformed their pension systems focusing mainly ... more In the past two decades, Latin American countries reformed their pension systems focusing mainly on addressing the weaknesses of the contributory schemes-fiscal unsustainability, low coverage levels and a high degree of segmentation-and barely addressed the non-contributory element. Thus, the reforms have failed to meet their objectives. Firstly, to this day, a large proportion of the population remains inadequately covered by the contributory system. Secondly, the fiscal outcome of the reform was worse than originally planned. Structural constraints such as the limited savings capacity of some population groups and the instability and precariousness of the labour markets in the region ensured that the pension reform would be unsuccessful. The Latin American experience shares similarities with that of China in terms of coverage and labour market informality. Both cases attest to the importance of combining contributory and non-contributory components in pension reform design. H 55; H 53

Research paper thumbnail of Un fondo de reservas regional para América Latina

Revista de la CEPAL, 2014

Research paper thumbnail of Institutions, Globalisation and Empowerment, by Kartik C. Roy and Jörn Sideras

Eastern Economic Journal, 2008

... Institutions, Globalisation and Empowerment, by Kartik C. Roy and Jörn Sideras. ... These inc... more ... Institutions, Globalisation and Empowerment, by Kartik C. Roy and Jörn Sideras. ... These include gender issues (United States, India, and Kenya), economic reform (Australia, Europe, Latin America, Russia, and Saudi Arabia), and firm structure (China, Hong Kong, and Taiwan). ...

Research paper thumbnail of Economists in Cambridge: a Study through their Correspondence, 1907 1946

Contributions to Political Economy, 2007

... Fabio Ranchetti is Professor of Economics at the University of Pisa, Italy. ... us in our res... more ... Fabio Ranchetti is Professor of Economics at the University of Pisa, Italy. ... us in our research: Katia Caldari, Alessandra Caretta, Claudia Cicconi, Maureen Donegan, Maria Teresa Duda, Christian Galassi, Monica Gentile, Martina Mosco, Cristina Saggioro, Iolanda Sanfilippo ...

Research paper thumbnail of Money and generalized exchange: A critical look at Neo-Walrasian theory1

Investigación Económica, 2015

The proof of existence of market clearing equilibrium is the cornerstone of Neo-Classical theory.... more The proof of existence of market clearing equilibrium is the cornerstone of Neo-Classical theory. While it is generally portrayed as a barter framework, the proof actually assumes an accepted system of credits and debits; a system of privately issued IOU's, or what is the same thing commitments by private agents to deliver a certain quantity of a given commodity at a given equilibrium price. In other words, the proof presupposes the existence of 'inside money'. Yet a system of generalized exchange with pure inside money is not compatible with the main principles of Neo-Classical monetary theory including that inflation is always and everywhere a monetary phenomenon, the exogeneity of money and also the neutrality of money. This explains the importance and necessity of introducing outside money in general equilibrium. Focussing mainly on Patinkin's 'invalid dichotomy' and the real balance effect, and to a lesser extent, on overlapping generation models, I try to show that these attempts have been unsuccessful. In both cases the integration of monetary and value theory amount to collapsing all individuals into a single one. This negates the very economic problem (i.e., multiple exchanges) that gave rise to general equilibrium theory and to the impending requirement to prove the existence of market clearing equilibrium.

Research paper thumbnail of Una lectura crítica de ‘la lectura crítica’ de la Ley de Thirlwall

Investigación Económica, 2015

Research paper thumbnail of The US-Central America-Dominican Republic Free Trade Agreement (CAFTA): Issues, Implications and Lessons for the Smaller Economies of Latin America …

This paper examines selected issues, implications and lessons of the United States-Central Americ... more This paper examines selected issues, implications and lessons of the United States-Central American Free Trade Agreement between the Central American Countries, the Dominican Republic and the United States. The paper argues that CAFTA will solidify the existing export specialization of the Central American countries and the Dominican Republic, which is mainly based on assembly plant products. The current export specialization has weak linkages with both internal and external demand, and therefore, is most likely not bound to improve growth prospects. In addition, CAFTA is part of a "new breed" of free trade agreements whose main goal is to subordinate trade policy to the dictates of the free market, which therefore significantly narrow the scope for public policy intervention.

Research paper thumbnail of issues and possible implications for China

In the past two decades, Latin American countries reformed their pension systems focusing mainly ... more In the past two decades, Latin American countries reformed their pension systems focusing mainly on addressing the weaknesses of the contributory schemes -fiscal unsustainability, low coverage levels and a high degree of segmentation-and barely addressed the non-contributory element. The reform experiences show however that the intended reforms did not manage to meet their objectives. Firstly, to this day, a large proportion of the population remains inadequately covered by the contributory system. Secondly, the fiscal performance and outcome of the reform was worse than originally planned. The possibilities for the success of these reforms faced several constraints of a structural nature that are independent of the pension system itself and that as a result can not be overcome by a pension reform including mainly the limited savings capacity of some population groups and the instability and precariousness of the labor markets in the region. The Latin American experience shares similarities with that of China in terms of coverage, labor market informality. Both cases attest to the importance of combining contributory and non-contributory components in pension reform design.

Research paper thumbnail of Can balance-of-payments constrained economies pursue inflation targeting?. A look at the case of Chile

Caribbean (ECLAC), Santiago, Chile, esteban.perez@eclac.org. The opinions here expressed are th... more Caribbean (ECLAC), Santiago, Chile, <esteban.perez@eclac.org>. The opinions here expressed are the authors' own and may not coincide with those of the institutions with which he is affiliated. Ramon Pineda provided useful suggestions to improve an earlier version of this paper.

Research paper thumbnail of The U.S.Central America-Dominican Republic Free Trade Agreement (CAFTA): Issues, Implications and Lessons for the Smaller Economies of Latin America and the Caribbean

This paper examines selected issues, implications and lessons of the United States-Central Americ... more This paper examines selected issues, implications and lessons of the United States-Central American Free Trade Agreement between the Central American Countries, the Dominican Republic and the United States. The paper argues that CAFTA will solidify the existing export specialization of the Central American countries and the Dominican Republic, which is mainly based on assembly plant products. The current export specialization

Research paper thumbnail of Trade openness, financial liberalization and volatility The Latin American experience

networkideas.org

Page 1. Trade openness, financial liberalization and volatility The Latin American experienceEste... more Page 1. Trade openness, financial liberalization and volatility The Latin American experienceEsteban Pérez Caldentey1 Introduction ... See, Williamson (1990). Page 2. 2 The main event that produced this change was the debt crisis and its effects on Latin American economies. ...

Research paper thumbnail of Harrod's interwar papers and correspondence: a review essay

Http Dx Doi Org 10 1080 09538250600915766, Jan 23, 2007

ABSTRACT This essay reviews Daniele Besomi&#39;s recently published three-volume collection o... more ABSTRACT This essay reviews Daniele Besomi&#39;s recently published three-volume collection of Roy F. Harrod&#39;s interwar correspondence and writings.

Research paper thumbnail of Strategies of “industrialization by invitation” in the Caribbean

Routledge Studies in Development Economics, 2007

Research paper thumbnail of ¿Pueden las economías con restricción de balanza de pagos perseguir metas de inflación? Un examen del caso Chileno

Investigación económica / Escuela Nacional de Economía, Universidad Nacional Autónoma de México

The current international financial system is anchored on the United States dollar. Countries tha... more The current international financial system is anchored on the United States dollar. Countries that do not issue the reserve currency must be able to acquire, and indeed accumulate, the currency they cannot issue to carry real and financial transactions. As a result, their external performance shapes and constrains to a significant extent their capacity to pursue domestic policies including fiscal and monetary policies. In this sense countries are said to be 'balance–of–payments' constrained. This paper examines, for the case of Chile, the limitations imposed by external conditions to the undertaking of a monetary policy strategy, inflation targeting, which focuses explicitly on a domestic objective, namely a low and stable rate of inflation. Chile adopted an inflation targeting strategy in 1991. Since, the adoption of the inflation targeting strategy followed two clear and distinct phases. The first one lasted from 1991 to 1999 and can be termed an Eclectic Inflation Targeti...

Research paper thumbnail of Sistemas de Pago en América Latina

Research paper thumbnail of Chicago, Keynes and Fiscal Policy

During the first half of the 1930's, the founders of the Chicago School of economics and John May... more During the first half of the 1930's, the founders of the Chicago School of economics and John Maynard Keynes in England advocated public works and as a cure for unemployment and a way to overcome the Great Depression. Counter cyclical fiscal policy was seen as a feasible strategy to attenuate the phases of the economic cycle. The quantity theory of money coupled with the hypothesis of wage and price rigidity provided the theoretical underpinnings for this policy proposal. These economists argued that a m onetary policy channeled through the banking system was ineffective. In particular, Chicago economists identified two key features that exemplified this restriction: the instability of the circulation velocity of money and the fragility and underdevelopment of the banking system and financial structure. Fiscal policy was thus advocated on the basis of market rigidities and the impotency of monetary policy.

Research paper thumbnail of The Concept and Evolution of the Developmental State

International Journal of Political Economy, 2008

Page 1. 27 Esteban Pérez Caldentey is an Economic Affairs Officer at the Economic Commission for ... more Page 1. 27 Esteban Pérez Caldentey is an Economic Affairs Officer at the Economic Commission for Latin America and the Caribbean (ECLAC) in Santiago, Chile. ... DOI 10.2753/IJP0891-1916370302 ESTEBAN PÉREZ CALDENTEY The Concept and Evolution of the ...

Research paper thumbnail of Weak Expansions: A Distinctive Feature of the Business Cycle in Latin America and the Caribbean

World Economic Review, 2014

ABSTRACT Using two standard cycle methodologies (classical and deviation cycle) and a comprehensi... more ABSTRACT Using two standard cycle methodologies (classical and deviation cycle) and a comprehensive sample of 83 countries worldwide, including all developing regions, we show that the Latin American and Caribbean cycle exhibits two distinctive features. First, and most important, its expansion performance is shorter and, for the most part, less intense than that of the rest of the regions considered; in particular, that of East Asia and the Pacific. East Asia’s and the Pacific’s expansions last five years longer than those of Latin American and the Caribbean, and its output gain is 50 percent greater. Second, the Latin American and Caribbean region tends to exhibit contractions that are not significantly different from those other regions in terms of duration and amplitude. Both these features imply that the complete Latin American and Caribbean cycle has, overall, the shortest duration and smallest amplitude in relation to other regions. The specificities of the Latin American and Caribbean cycle are not confined to the short run. These are also reflected in variables such as productivity and investment, which are linked to long-run growth. East Asia’s and the Pacific’s cumulative gain in labor productivity during the expansionary phase is twice that of Latin American and the Caribbean. Moreover, the evidence also shows that the effects of the contraction in public investment surpass those of the expansion, leading to a declining trend over the entire cycle. In this sense, we suggest that policy analysis needs to increase its focus on the expansionary phase of the cycle. Improving our knowledge of the differences in the expansionary dynamics of countries and regions can further our understanding of the differences in their rates of growth and levels of development. We also suggest that, while the management of the cycle affects the short-run fluctuations of economic activity and therefore volatility, it is not trend neutral. Hence, the effects of aggregate demand management policies may be more persistent over time, and less transitory, than currently thought.