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International Monetary Fund. Western Hemisphere Dept.

Abstract

Section III in this Regional Economic Outlook—as well as the confidence intervals around the central forecast shown in section II—is based on a multivariate autoregressive model that relates growth outcomes in Latin America to a variety of economic variables. Specifically, the analysis employs a “Bayesian Vector-Autoregression” model for Latin American growth. This can be written as

International Monetary Fund. Western Hemisphere Dept.

Abstract

The global economy expanded vigorously in 2006 amidst moderating inflationary pressures. World growth was 5.4 percent,1 despite some cooling around mid-year (see the April 2007 World Economic Outlook (WEO)). Notwithstanding a slowdown in the housing market, activity in the United States was sustained by strong consumption, continued employment growth, declining oil prices from August highs, and some moderation of long-term interest rates. In the euro area, growth accelerated to its highest pace in six years as domestic demand was boosted by increasing business confidence and solid employment growth. Activity in Japan regained momentum toward year-end after slowing earlier in the year. Growth in emerging markets and developing countries was buoyant at around 8 percent, led by continued brisk expansions in China and India. Inflationary pressures, which earlier in the year arose from strong growth and high oil prices, generally moderated during the second half of the year, dampened by monetary policy tightening and declining oil prices.

International Monetary Fund. Western Hemisphere Dept.

Abstract

Growth in the Latin American and Caribbean region (LAC) remains robust. For the region as a whole, growth in 2006 reached 5½ percent. Last year’s outturn brings average growth in the last three years to 5¼ percent, the best performance since the late 1970s. With the recovery now at a more mature stage, the expansion has become increasingly reliant on domestic demand as the main engine of growth. Import growth has rebounded and net exports have exerted a downward pull on growth as several economies emerged from crises earlier in the decade.

International Monetary Fund. Western Hemisphere Dept.

Abstract

The recent slowing of growth in the United States and the projected softening of nonfuel commodity prices has rekindled interest in an old question: how are changes in external conditions likely to affect growth in Latin America? This section seeks to provide a quantitative answer based on a model estimated on 1994–2006 data (see appendix for details) and a variety of “scenarios” of how the external environment for Latin America might evolve, which draw on the analysis of global risks in the April 2007 WEO. These elements form the basis for the probability distributions around the baseline growth projection presented in Section II.

IMF Research Perspective (formerly published as IMF Research Bulletin) is a new, redesigned online newsletter covering updates on IMF research. In the inaugural issue of the newsletter, Hites Ahir interviews Valeria Cerra; and they discuss the economic environment 10 years after the global financial crisis. Research Summaries cover the rise of populism; economic reform; labor and technology; big data; and the relationship between happiness and productivity. Sweta C. Saxena was the guest editor for this inaugural issue.
International Monetary Fund. External Relations Dept.
The Web edition of the IMF Survey is updated several times a week, and contains a wealth of articles about topical policy and economic issues in the news. Access the latest IMF research, read interviews, and listen to podcasts given by top IMF economists on important issues in the global economy. www.imf.org/external/pubs/ft/survey/so/home.aspx
Mr. Alun H. Thomas, Mr. Jun I Kim, and Aqib Aslam
This paper introduces a methodology for assessing external balance in countries with large stocks of non-renewable resources based on oil stock data, and applies it to selected oil producing countries. The methodology uses a stock approach (instead of the more traditional flow approach) to estimate the equilibrium non-oil current account consistent with optimal consumption smoothing. One of the benefits of the stock approach is that geological data for oil reserves can be used to estimate oil wealth; however, the methodology makes the estimated non-oil current account norm very sensitive to oil price projections. Based on an oil price about US$70 per barrel prevailing in the summer of 2007, the baseline estimates indicate that the non-oil current accounts for most of the countries in the sample are broadly in equilibrium. By the same token, using oil price projections as of the summer of 2008 implies large disparities between the equilibrium non-oil current account position and the medium term forecast for all countries in the sample except for Malaysia.
Mr. Tao Wu and Mr. Michele Cavallo
We study the effects of oil-price shocks on the U.S. economy combining narrative and quantitative approaches. After examining daily oil-related events since 1984, we classify them into various event types. We then develop measures of exogenous shocks that avoid endogeneity and predictability concerns. Estimation results indicate that oil-price shocks have had substantial and statistically significant effects during the last 25 years. In contrast, traditional VAR approaches imply much weaker and insignificant effects for the same period. This discrepancy stems from the inability of VARs to separate exogenous oil-supply shocks from endogenous oil-price fluctuations driven by changes in oil demand.
International Monetary Fund. Western Hemisphere Dept.

Abstract

The ongoing expansion in Latin America represents the most vigorous period of sustained growth since the 1970s. Even so, growth has lagged most other developing country regions. What would it take for investment and productivity growth in Latin America to catch up? And what can be done to make the current expansion sustained—that is, to avoid a relapse to earlier boom-bust cycles? These questions are addressed in turn.