Cover IMF Working Papers
Accounting for Output Drops in Latin America
Author: Mr. Ruy Lama
Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 067
Language:
English
Publication Date:
01 Mar 2009
DOI:
https://doi.org/10.5089/9781451872149.001
ISBN:
9781451872149
ISSN:
1018-5941
Pages:
49
Keywords:
WP; open economy; labor wedge; working capital
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper evaluates what type of models can account for the recent episodes of output drops in Latin America. I develop an open economy version of the business cycle accounting methodology (Chari, Kehoe, and McGrattan, 2007) in which output fluctuations are decomposed into four sources: total factor productivity (TFP), a labor wedge, a capital wedge, and a bond wedge. The paper shows that the most promising models are the ones that induce fluctuations of TFP and the labor wedge. On the other hand, models of fnancial frictions that translate into a bond or capital wedge are not successful in explaining output drops in Latin America. The paper also discusses the implications of these results for policy analysis using alternative DSGE models.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund