New Economics Papers
on Central and South America
Issue of 2014‒07‒28
three papers chosen by

  1. Further evidence on the determinants of regional stock market integration in Latin America By Khaled Guesmi; Duc Khuong Nguyen; Frédéric Teulon
  2. Is the Eurozone on the Mend? Latin American Examples to Analyze the Euro Question By Eduardo A. Cavallo; Eduardo Fernández Arias; Andrew Powell
  3. Collective Action and Armed Group Presence in Colombia By Margarita Gáfaro; Ana Maria Ibáñez; Patricia Justino

  1. By: Khaled Guesmi; Duc Khuong Nguyen; Frédéric Teulon
    Abstract: This paper employs a conditional version of the International Capital Asset Pricing Model (ICAPM) to investigate the determinants of regional integration of stock markets in the Latin America over the period 1996-2008. This model allows for three sources of time-varying risks: common regional market risk, exchange rate risk and local market risk. In particular, exchange rate risk exposure is not only measured by bilateral exchange rates against the US dollar as in previous studies, but also by the real effective exchange rate index. At the empirical level, we make use of the asymmetric multivariate DCC-GARCH of Engle and Sheppard (2006) process to simultaneously estimate the ICAPM for four major Latin American emerging countries (Argentina, Brazil, Chile and Mexico). Our findings show that the degrees of trade openness and stock market development are among the most important drivers of regional integration in the Latin America context whatever the measure of the exchange rate risk.
    Keywords: Multivariate GARCH, regional integration, ICAPM
    JEL: F36 C32 G15
    Date: 2014–07–15
  2. By: Eduardo A. Cavallo; Eduardo Fernández Arias; Andrew Powell
    Abstract: Several European countries face challenges reminiscent of those faced by the emerging economies of Latin America. The economic booms in some peripheral Euro-zone countries financed by large capital inflows; the credit and asset price booms and then the busts including Sudden Stops in capital flows; the strong interaction between sovereign debt and domestic banking systems; the role of foreign banks and contagion; and all in the context of a fixed exchange rate, are familiar plotlines for Latin American audiences. For those Euro-zone countries that built up large Euro-denominated external liabilities, Latin America's experience is particularly relevant and worrisome. Still, Europe may be in a better position to navigate a path out of the crisis given cooperative mechanisms that were absent in Latin America, particularly the availability of massive liquidity support. Nonetheless, while such support buys time, it does not guarantee success. This paper argues that reflecting on Latin America's experience provides useful lessons for Europe to improve the chances for a successful resolution.
    Keywords: Financial Crises & Economic Stabilization, Financial Policy, Public debt, Latin America, Financial crisis, Euro, Debt overhang, Banking crisis, Sudden Stops, Real devaluations, Currency union, Fiscal devaluation
    Date: 2014–07
  3. By: Margarita Gáfaro (Brown University); Ana Maria Ibáñez (Universidad de los Andes); Patricia Justino (Institute of Development Studies)
    Abstract: The main objective of this paper is to provide empirical evidence on the mechanisms that shape the relationship between violent conflict and collective action. Conflict dynamics in Colombia allow us to exploit rich variation in armed group presence and individual participation in local organizations. Our identification strategy is based on the construction of contiguous-pairs of rural communities that share common socio-economic characteristics but differ in armed group presence. This allows us to control for unobservable variables that may affect local participation and conflict dynamics simultaneously. The results show that the presence of armed groups increases overall participation in local organizations, with a particularly strong effect on political organizations. Contrary to existing results, we find that stronger individual participation may arise from coercion exercised by armed groups and not from a more vibrant civil society.
    Date: 2014–07

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