New Economics Papers
on Central and South America
Issue of 2011‒08‒02
six papers chosen by

  1. Fiscal deficit, macro-uncertainty, and growth in argentina By Jorge C. Avila
  2. Angus Maddison and Development Economics By Szirmai, Adam
  3. A Comparison of Product Price Targeting and Other Monetary Anchor Options, for Commodity Exporters in Latin America By Frankel, Jeffrey A.
  4. Constructing coincident and leading indices of economic activity for the brazilian economy By Issler, João Victor; Notini, Hilton Hostalacio; Rodrigues, Claudia Fontoura
  5. Public Pension Systems and the Fiscal Crisis in the Euro Zone. Lessons for Latin America By Javier Alonso; Rafael Domenech; David Tuesta
  6. China's Emergence in the World Economy and Business Cycles in Latin America By Cesa-Bianchi, A.; Pesaran, M. H.; Rebucci, A.; Xu, T.

  1. By: Jorge C. Avila
    Abstract: We analyze the relationship between fiscal deficit, macroeconomic uncertainty and growth for the period 1915-2006, and conclude that the deficit, possibly through the volatility in relative prices it generates, is a significant restriction on per-capita income growth in Argentina.
    Date: 2011–06
  2. By: Szirmai, Adam (UNU-MERIT, and Maastricht Graduate School of Governance, Maastricht University)
    Abstract: This paper was prepared for the Angus Maddison Memorial conference, held in November 2010 at the International Institute of Social History in Amsterdam. The paper reflects on Angus Maddison's contributions to development economics. It focuses on the following issues: 1. quantification in development economics and the framework of proximate and ultimate causality in growth and development; 2 the debate about levels of GDP per capita in the middle of the eighteenth century; 3 Maddison versus the Malthusians; 4 measurement of Chinese Economic Performance in the long run; 5. the impact of Western expansion on the non-Western world and 6. the role of institutions in economic development.
    Keywords: Economic Growth, Development Economics, GDP per capita, China, Western Expansion, Institutions
    JEL: N10 O10
    Date: 2011
  3. By: Frankel, Jeffrey A. (Harvard University)
    Abstract: Seven possible nominal variables are considered as candidates to be the anchor or target for monetary policy. The context is countries in Latin America and the Caribbean (LAC), which tend to be price takers on world markets, to produce commodity exports subject to volatile terms of trade, and to experience procyclical international finance. Three anchor candidates are exchange rate pegs: to the dollar, euro and SDR. One candidate is orthodox Inflation Targeting. Three candidates represent proposals for a new sort of inflation targeting that differs from the usual focus on the CPI, in that prices of export commodities are given substantial weight and prices of imports are not: PEP (Peg the Export Price), PEPI (Peg an Export Price Index), and PPT (Product Price Targeting). The selling point of these production-based price indices is that each could serve as a nominal anchor while yet accommodating terms of trade shocks, in comparison to a CPI target. CPI-targeters such as Brazil, Chile, and Peru are observed to respond to increases in world prices of imported oil with monetary policy that is sufficiently tight to appreciate their currencies, an undesirable property, which is the opposite of accommodating the terms of trade. As hypothesized, a product price target generally does a better job of stabilizing the real domestic prices of tradable goods than does a CPI target. Bottom line: A Product Price Targeter would appreciate in response to an increase in world prices of its commodity exports, not in response to an increase in world prices of its imports. CPI targeting gets this backwards.
    JEL: E50 F40
    Date: 2011–07
  4. By: Issler, João Victor; Notini, Hilton Hostalacio; Rodrigues, Claudia Fontoura
    Abstract: This paper has three original contributions. The first is the reconstructioneffort of the series of employment and income to allow the creation of a newcoincident index for the Brazilian economic activity. The second is the construction of a coincident index of the economic activity for Brazil, and fromit, (re) establish a chronology of recessions in the recent past of the Brazilian economy. The coincident index follows the methodology proposed by TheConference Board (TCB) and it covers the period 1980:1 to 2007:11. The thirdis the construction and evaluation of many leading indicators of economic activity for Brazil which fills an important gap in the Brazilian Business Cyclesliterature.
    Date: 2011–03–30
  5. By: Javier Alonso; Rafael Domenech; David Tuesta
    Abstract: The debt crisis in the Economic and Monetary Union has revealed the need in many member countries to engage in an unprecedented fiscal consolidation process, not only in the short term, but also in the long term. Therefore, the urgent need to accelerate in many cases the reforms of their pension systems with a view to ensuring the sustainability of their public finance over time has been revived. This paper analyzes the circumstances that led to the reforms of the pension systems in Europe and the measures adopted, with a view to extracting some lessons that may be of use for Latin American countries. With this objective, reforms undertaken in Latin America are also described, specifically in Colombia and Peru, which are two cases where the capitalization and distribution systems continue to compete simultaneously. This paper also quantifies and compares the actuarial balance of these countries, which is related to their financial sustainability in the long term.
    Keywords: Pensions, fiscal deficit, actuarial debt, Europe, Latin America.
    JEL: E32 C22 E27
    Date: 2011–05
  6. By: Cesa-Bianchi, A.; Pesaran, M. H.; Rebucci, A.; Xu, T.
    Abstract: The international business cycle is very important for Latin America's economic performance as the recent global crisis vividly illustrated. This paper investigates how changes in trade linkages between China, Latin America, and the rest of the world have altered the transmission mechanism of international business cycles to Latin America. Evidence based on a Global Vector Autoregressive (GVAR) model for 5 large Latin American economies and all major advanced and emerging economies of the world shows that the long-term impact of a China GDP shock on the typical Latin American economy has increased by three times since mid-1990s. At the same time, the long-term impact of a US GDP shock has halved, while the transmission of shocks to Latin America and the rest of emerging Asia (excluding China and India) GDP has not undergone any significant change. Contrary to common wisdom, we find that these changes owe more to the changed impact of China on Latin America's traditional and largest trading partners than to increased direct bilateral trade linkages boosted by the decade-long commodity price boom. These findings help to explain why Latin America did so well during the global crisis, but point to the risks associated with a deceleration in China's economic growth in the future for both Latin America and the rest of the world economy. The evidence reported also suggests that the emergence of China as an important source of world growth might be the driver of the so called "decoupling" of emerging markets business cycle from that of advanced economies reported in the existing literature.
    JEL: C32 E32 O54
    Date: 2011–07–26

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