Latin American Falls, Rebounds and Tail Risks
La serie Borradores de Economía es una publicación de la Subgerencia de Estudios Económicos del Banco de la República. Los trabajos son de carácter provisional, las opiniones y posibles errores son responsabilidad exclusiva del autor y sus contenidos no comprometen al Banco de la República ni a su Junta Directiva.
The series Borradores de Economía (Working Papers on Economics) contributes to the dissemination and promotion of the work by researchers from the institution. On multiple occasions, these works have been the result of collaborative work with individuals from other national or international institutions. This series is indexed at Research Papers in Economics (RePEc). The opinions contained in this document are the sole responsibility of the author and do not commit Banco de la República or its Board of Directors.
Abstract
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.
