Trading partners and growth in Latin America: a dynamic SVAR approach

This study evaluates how shocks originating in major economies around the world have been transmitted to the growth rates of Latin American countries. To this end, it proposes, estimates, evaluates, and simulates a fairly parsimonious structural VAR model, identified through bilateral trade links. Since trade weights evolve over the course of the sample period, the effects of the shocks change over time. Consequently, it is possible to quantify how the region’s growth has been affected by closer trade ties with fast-growing emerging economies, and how it has responded to a new global trade structure, with China playing a leading role. The study finds that nearly half of the robust growth recorded in Latin America in the late 2000s can be attributed to multipliers (direct and primarily indirect) induced by the spectacular growth of the Chinese economy during the same period. (Audio: Department of Economic Publications)