The Determinants Policy Convergence in Latin America and the Caribbean (original) (raw)
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There have been numerous attempts at the formation of regional policy groupings within Latin America and the Caribbean (LAC). This paper analyses whether or not there has been any convergence in the macroeconomic policies pursued by member countries using realised correlation analysis and panel unit root tests of convergence for 26 LAC countries and observations covering the period 1970 to 2006. The study finds evidence of comovement in monetary, fiscal, trade and capital account policies, the strength of association rising over time.
Contributing to the empirical debate on the effects of IMF-supported programs on the socioeconomic performance of participating countries in Latin American and The Caribbean. Using macro socioeconomic datasets, the paper places focus on whether or not these programs lead to convergence among low-income and emerging economies through the use of an original quantitative research method: Dynamic Patterns Synthesis (DPS). DPS provides a new longitudinal method for studying macroeconomics and public policy and has evolved from the established methods of Hierarchical Cluster Analysis (HCA) and Qualitative Comparative Analysis (QCA). DPS identifies convergent and heterogenous cases (using case-based quantitative techniques), while also remaining close to the qualitative uniqueness of each case. HCA is used first to explore and hypothesize about case groupings. Crisp set, QCA is then applied to each cluster, to test what variable patterns underpin each group. Where a cluster shares variable characteristics, different variable patterns evidence different clusters, allowing for considerations of 'complex causal configurations'. Longitudinal calculations are then used to examine whether patterns remain consistent over time. In this paper, the DPS approach is used to consider countries in Latin American and The Caribbean and their interactions with IMF interventions through the 2007 financial crisis. IMF interventions are added to the model, after the first hierarchical cluster analysis and cluster definition stage. The findings reveal a complex degree of dynamics experienced across Latin American and The Caribbean economies overtime. However, the results suggest that IMF interventions do not necessarily have an effect on country convergence.
Regional Convergence in Latin America
2006
The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper presents empirical evidence on convergence of per capita output for regions within six large middle-income Latin American countries: Argentina, Brazil, Chile, Colombia, Mexico, and Peru. It explores the role played by several exogenous sectoral shocks and differences in steady states within each country. It finds that poor and rich regions within each country converged at very low rates over the past three decades. It also finds evidence of regional "convergence clubs" within Brazil and Peru-the estimated speeds of convergence for these countries more than double after controlling for different subnational levels of steady state. For the latter countries and Chile, convergence is also higher after controlling for sector-specific shocks. Finally, results show that national disparities in per capita output increased temporarily after each country pursued trade liberalization. JEL Classification Numbers: C21, O47, O56, R11
Are there Economic Convergence Clubs in Latin America?
Journal of Economics and Development Studies, 2014
The aim of this paper is to analyse the hypothesis of convergence in the Gross Domestic Product (GDP) per capita in Latin America in the period 1950-2010 through the nonlinear coefficients model variants of a single factor in the time proposed by Philips and Sul (2007). This approach has the virtue of being extremely flexible to model a significant amount of transition paths to convergence; besides, it does not requires an assumption about the non-stationary of the series of the panel of analysis. We found evidence of relative convergence to four groups or clubs of countries, when the series of GDP per capita have not been filtered, and we have not found evidence of convergence when the series are previously filtered through the Hodrick-Prescott filter, except for Bolivia and Nicaragua. These results can be construed into evidence that groups of countries in a region are subject to common external shocks more than a process of convergence between them.
Regional integration and macroeconomic coordination in Latin America
CEPAL Review, 2004
The contagion aspects of the financial and exchange-rate crises in recent years demonstrate the need to extend the domain of macroeconomic policy from the national dimension to the regional one. This paper presents the main concepts and challenges behind macroeconomic policy cooperation in Latin America and the Caribbean and evaluates them from a game-theory perspective. Under certain conditions related to the debate on optimal currency areas, entering into a cooperative dynamic will be beneficial for all participants. Moreover, it is shown that because the welfare gains from regional cooperation are endogenous, cooperation will eventually become stable, even in the presence of a Prisoner' s Dilemma. Albeit promising at the subregional level, however, the initial conditions observed in Latin America are still far from the conditions of self-sustained dynamics. At the initial stage of coordination, cooperation is unstable, and a formal institutional setting is needed to start and coordinate the cooperative process. In addition, more traditional policies of trade integration should be pursued.
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Economic Integration in Latin America
Journal of Economic Integration, 2013
This study examines the feasibility of economic integration in Latin America. We analyze the existence of the long-term and short-term common movements among key macro variables-real GDP, intra-regional trade, private investment and consumption-in the seven largest economies in Latin America-Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. The joint behavior of the long term trends and the joint response to transitory shocks suggest a significant degree of economic synchronization among these countries. Our results reveal that the economic fluctuations in these countries follow a similar pattern in terms of duration, intensity, response, and timing both in the long run and in the short run. The findings suggest that the group of seven economies in Latin America can lead the path of integration in the region more smoothly as macroeconomic conditions are favorable for them to do so.