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Foreign capital in Latin America: A long-run structural Global VAR perspective
Full text linkI study the determinants of capital flows to Argentina, Brazil, and Mexico, assessing the relative importance of domestic and global factors. I estimate six VECM models, one for each Latin American country plus the Euro Area, Japan, and USA, and then embed them in a multi-country
Global VAR. The co-integrating space is identified in terms of theoretical long-run relations linking net foreign assets (NFA) to the other variables of the model. The results show that in the long-run external prevail on
domestic factors as determinants of the equilibrium behaviour of NFA, with the relative importance of each factor varying from one country to another. Generalized Impulse Response Functions (GIRF) and Forecast
Error Variance Decomposition (GFEVD) provide overwhelming evidence that domestic shocks are predominantly responsible for the short-run dynamics of Latin American NFA. Although all previous studies focus on North-American economic influence, one striking result of this paper is that the US variables are by no means the main external factors affecting Latin American NFA. Quite on the contrary, Japanese and, to a lesser extent, European cyclical conditions explain a large proportion of Latin American NFA short-run behaviour
International Financial Contagion: Evidence from the Argentine Crisis of 2001-2002
Full text linkThe aim of this paper is to look for evidence of financial contagion suffered by several countries as a result of the latest Argentine crisis.
I focus my attention on a set of countries: Brazil, Mexico, Russia, Turkey, Uruguay, and Venezuela. I also focus exclusively on three financial markets: foreign exchange, stock exchange, and sovereign debt.
In order to test the hypothesis of contagion, Vector Autoregression (VAR) models and instantaneous correlation coefficients corrected for heteroscedasticity are estimated. The analysis shows that there is no evidence of contagion. This result provides empirical support for the
non-crisis-contingent theories of international financial contagion
Long- and short-run determinants of capital flows to Latin America: a long-run structural GVAR model
No full textThis article documents the determinants of capital flows to Argentina, Brazil and Mexico, assessing the relative importance of domestic and international factors through the estimation of a long-run structural Global VAR model of the world economy. The results show that in the long-run international factors prevail on domestic factors as determinants of the equilibrium behaviour of Net Foreign Assets (NFA) and also provide overwhelming evidence that domestic shocks are predominantly responsible for their short-run dynamics. Although all previous studies focus on the US economic influence, one striking result of this article is that the US variables are by no means the main external factors affecting Latin American NFA
The contribution of domestic, regional and international factors to Latin America's business cycle
Full text linkThis paper quantifies the relative contribution of domestic, regional and international factors to the
fluctuation of domestic output in six key Latin American (LA) countries: Argentina, Bolivia, Brazil,
Chile, Mexico and Peru. Using quarterly data over the period 1980:1-2003:4, a multi-variate, multi-
country time series model was estimated to study the economic interdependence among LA countries
and, in addition, between each of them and the three world largest industrial economies: the US, the
Euro Area and Japan. Falsifying a common suspicion, it is shown that the proportion of LA countries'
domestic output variability explained by industrial countries'factors is modest. By contrast, domestic
and regional factors account for the main share of output variability at all simulation horizons. The
implications for the choice of the exchange rate regime are also discussed
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