Common and idiosyncratic components of Latin American business cycles connectedness

Figures & data

Figure 1. More regional trade.

Note: The vertical axis represents the regional trade openness as a percentage of total trade openness. The shaded areas represent the years under study. Source: IMF Financial Statistics.

Figure 2. Improved macroeconomic outcome.

Source: National Statistics Institutes and Cavallo (2012) for Argentina.

Table 1. Deeper financial integration

	1992–1994						1995–2003						2003–2021
	Ar	Br	Ch	Co	Me	Pe	Ar	Br	Ch	Co	Me	Pe	Ar	Br	Ch	Co	Me	Pe
Ar	1.0	0.4	0.8	–	–	0.1	1.0	0.3	0.2	–	0.6	0.6	1.0	0.5	0.5	0.3	0.5	0.4
Br	0.4	1.0	0.4	–	–	−0.2	0.3	1.0	0.4	–	0.5	0.5	0.5	1.0	0.7	0.6	0.7	0.8
Ch	0.8	0.4	1.0	–	–	−0.3	0.2	0.4	1.0	–	0.3	0.5	0.5	0.7	1.0	0.6	0.7	0.7
Co	–	–	–	–	–	–	–	–	–	–	–	–	0.3	0.6	0.6	1.0	0.7	0.6
Me	–	–	–	–	–	–	0.6	0.5	0.3	–	1.0	0.5	0.5	0.7	0.7	0.7	1.0	0.8
Pe	0.1	−0.2	−0.3	–	–	1.0	0.6	0.5	0.5	–	0.5	1.0	0.4	0.8	0.7	0.6	0.8	1.0
Mean	0.5	0.2	0.3	–	–	−0.1	0.4	0.4	0.4	–	0.5	0.5	0.4	0.7	0.6	0.6	0.7	0.7

Correlation table of yearly variations of the national stock market S&P indexes. Source: Bloomberg.

Table 2. Higher exchange rate correlations

	1986–1994						1994–2003						2003–2021
	Ar	Br	Ch	Co	Me	Pe	Ar	Br	Ch	Co	Me	Pe	Ar	Br	Ch	Co	Me	Pe
Ar	1.0	0.4	0.0	0.4	−0.1	–	1.0	−0.1	0.1	−0.1	−0.1	−0.3	1.0	0.5	0.5	0.4	0.2	0.5
Br	0.4	1.0	−0.3	−0.3	−0.7	–	−0.1	1.0	−0.1	−0.5	−0.0	0.3	0.5	1.0	0.7	0.8	0.6	0.7
Ch	0.0	−0.3	1.0	0.6	0.4	–	0.1	−0.1	1.0	0.3	−0.7	0.0	0.5	0.7	1.0	0.7	0.6	0.6
Co	0.4	−0.3	0.6	1.0	0.4	–	−0.1	−0.5	0.3	1.0	−0.1	0.2	0.4	0.8	0.7	1.0	0.7	0.8
Me	−0.1	−0.7	0.4	0.4	1.0	–	−0.1	−0.0	−0.7	−0.1	1.0	−0.1	0.2	0.6	0.6	0.7	1.0	0.6
Pe	–	–	–	–	–	–	−0.3	0.3	0.0	0.2	−0.1	1.0	0.5	0.7	0.6	0.8	0.6	1.0
Mean	0.2	−0.2	0.2	0.3	−0.0	–	−0.1	−0.1	−0.1	−0.0	−0.2	0.0	0.4	0.7	0.6	0.7	0.5	0.6

Correlation table of yearly variations of the nominal exchange rates. Source: National Central Banks.

Table 3. Stronger business cycles correlations

	1986–1994						1994–2003						2003–2021
	Ar	Br	Ch	Co	Me	Pe	Ar	Br	Ch	Co	Me	Pe	Ar	Br	Ch	Co	Me	Pe
Ar	1.0	−0.1	0.1	0.0	−0.1	0.1	1.0	0.5	0.2	0.4	0.6	0.4	1.0	0.6	0.4	0.4	0.5	0.4
Br	−0.1	1.0	0.1	0.0	−0.4	0.2	0.5	1.0	0.1	0.2	0.3	0.5	0.6	1.0	0.3	0.3	0.5	0.4
Ch	0.1	0.1	1.0	−0.1	−0.2	−0.4	0.2	0.1	1.0	0.4	−0.1	0.5	0.4	0.3	1.0	0.5	0.5	0.4
Co	0.0	0.0	−0.1	1.0	0.1	0.3	0.4	0.2	0.4	1.0	0.2	0.5	0.4	0.3	0.5	1.0	0.4	0.5
Me	−0.1	−0.4	−0.2	0.1	1.0	−0.3	0.6	0.3	−0.1	0.2	1.0	0.3	0.5	0.5	0.5	0.4	1.0	0.5
Pe	0.1	0.2	−0.4	0.3	−0.3	1.0	0.4	0.5	0.5	0.5	0.3	1.0	0.4	0.4	0.4	0.5	0.5	1.0
Mean	−0.0	−0.0	−0.1	0.1	−0.2	−0.0	0.4	0.3	0.2	0.3	0.3	0.4	0.5	0.4	0.4	0.4	0.5	0.4

Correlation table of the cyclical components of the HP-filtered series of IP indexes. Source: National Statistics Institutes.

Figure 3. Regional recession probabilities.

Note: estimates obtained with the MS-VAR model.

Figure 4. Industrial production yearly growth rates and regional recessions.

Source: National Statistics Institutes. Note: regional crises estimated with the MS-VAR model.

Figure 5. US financial conditions index.

Note: the US financial conditions index is from the Chicago Fed. An increase in this index indicates tighter financial conditions. The gray bars correspond to the regional crises estimated with the MS-VAR model.

Figure 6. Total connectedness (%), 5 year rolling window.

Note: the solid line was obtained with the IPI and the dotted line with the idiosyncratic components. The blue area indicates the difference among them, which is interpreted as the common factor. The gray bars correspond to the regional crises estimated with the MS-VAR model.

Figure 7. Net group connectedness (%), 5 year rolling window.

Note: the solid line was obtained with the IPI and the dotted line with the idiosyncratic components. The blue area indicates the difference among them, which is interpreted as the common factor. The gray bars correspond to the regional crises estimated with the MS-VAR model.

Figure 8. Net pairwise connectedness (%), 5 year rolling window.

Note: the solid line was obtained with the IPI and the dotted line with the idiosyncratic components. The blue area indicates the difference among them, which is interpreted as the common factor. The gray bars correspond to the regional crises estimated with the MS-VAR model.

Figure A1. Regional recession probabilities, 12- and 1-month IPI variations.

Note: estimates obtained with the MS-VAR model.

Figure A2. 1-month IPI variations and regional recessions.

Source: National Statistics Institutes. Note: regional crises estimated with the MS-VAR model.

Figure A3. Total connectedness (%), 5 year rolling window, 12- and 1-month IPI variations.

Note: the solid line was obtained with the IPI and the dotted line with the idiosyncratic components. The blue area indicates the difference among them, which is interpreted as the common factor. The gray bars correspond to the regional crises estimated with the MS-VAR model.

Figure A4. Regional recession probabilities and OCDE recessions.

Note: the top panel shows the regional probabilities of recessions calculated with the MS-VAR model. The shaded bars indicate periods when these probabilities where higher than 50%. The rest of the panels show the yearly IPI growth rates together with the shaded bars, which correspond to the OCDE recession periods.

Cavallo, A. (2012). Online and official price indexes: Measuring Argentina’s inflation. Journal of Monetary Economics, 60(2), 152–165.

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