Have business cycles changed over the last two decades? An empirical investigation

Calderón, César; Fuentes, J. Rodrigo

doi:10.1016/j.jdeveco.2014.03.001

Cited by 35 publications

(25 citation statements)

References 38 publications

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“…In the case of Brazil and Mexico, there is more uncertainty about the timing of the break. Overall, these results are consistent with the findings of Calderón and Fuentes () who find that during what they call the “globalization era” (after 1990) recessions in LatAm are shorter in duration and milder in amplitude. As discussed in Blanchard and Simon () and Harding and Pagan (), an increase in the mean growth rate combined with a reduction in volatility implies business cycles with fewer and shorter recessions.…”

Section: Resultssupporting

confidence: 92%

Output Growth and Structural Reform in Latin America: Have Business Cycles Changed?

Fossati

2016

Contemporary Economic Policy

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This paper documents important changes in real gross domestic product (GDP) growth of six large Latin American countries. The main results can be summarized as follows. First, there is evidence of a structural break in real GDP toward stronger mean growth and a substantial reduction in volatility. Second, the timing of the breaks suggests that the important changes in economic policies of the 1980s and 1990s have been effective in permanently improving economic growth in the region. These changes in the growth processes imply recessions that are shorter in duration and milder in amplitude. The sustained increase in commodity prices observed in recent years explains an important share of growth in the region since 2003. But after accounting for the effect of commodity prices, there is even stronger evidence of a structural break in real GDP growth. (JEL E32)

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Section: Resultssupporting

confidence: 92%

Output Growth and Structural Reform in Latin America: Have Business Cycles Changed?

Fossati

2016

Contemporary Economic Policy

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“…In addition to important implications for the impact of monetary policy (namely, the role of the cost channel and the possibility of a "price puzzle"), the relationship between short-term credit and output-with credit often preceding output at turning points-means that the business cycle and the financial cycle tend to be more closely synchronized than in industrial countries, as documented by Amador et al (2014), Calderón and Fuentes (2014), and Gonzalez, Lima and Marinho (2015). In particular, Amador et al (2014) (Agénor, Alper and Pereira da Silva, 2014).…”

mentioning

confidence: 99%

Reserve Requirements and Loan Loss Provisions as Countercyclical Macroprudential Instruments: A Perspective from Latin America

Silva¹,

Agénor²

2016

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work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.http://www.iadb.org 2016 Abstract * This paper discusses, from an analytical and operational perspective, the use of reserve requirements and loan loss provisions as countercyclical macroprudential instruments. In recent years both of these instruments have been used extensively in Latin America and elsewhere in the world. The first part of the paper sets the stage with a discussion of the rationale, in the presence of financial frictions, for using macroprudential regulation to mitigate financial system procyclicality. The second part reviews the general arguments, as well as the recent empirical evidence for Latin America, associated with the use of reserve requirements and loan loss provisions. The third part provides a normative analysis of the ways through which countercyclical reserve requirements and cyclically adjusted (or, more commonly called, dynamic) provisioning rules should be formulated, independently and jointly, to address concerns arising from procyclicality and financial volatility. Optimal countercyclical rules are discussed from the perspective of how these rules can either minimize a composite measure of economic volatility (combining measures of both macroeconomic and financial volatility) or maximize social welfare. The last part brings together the lessons for policymakers that can be drawn from the analysis. JEL classifications: E51, E58, G28

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“…In a panel of 71 countries from 1970 to 2012, Calderon and Fuentes (2014) arrive at the conclusion that recessions in the EMEs are deeper, steeper and costlier than those in industrial countries, and that this condition is associated with a higher incidence of crises in the EMEs. Recoveries in the EMEs are stronger but slower and more volatile than those in industrial countries.…”

Section: Online Firstmentioning

confidence: 98%

Monetary Policy and Cyclical Systemic Risk - Friends or Foes?

Kurowski¹,

Smaga²

2018

Prague Economic Papers

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We explore the procyclicality of monetary policy decisions towards the financial cycle in the 1995−2015 period on a sample of seven central banks. Using the real interest rate gap and the credit-to-GDP gap, we provide evidence that monetary policy procyclicality is a material issue occurring in more than 50% of observations in expansionary phase of financial cycle. It indicates that the central bank faces conflicting objectives of price and financial stability (as proxied by cyclical systemic risk). Nevertheless, taking into consideration all financial cycle phases, complementariness between price and financial stability is more frequent than cases with conflicting objectives in the UK, Euro Area and the US. The occurrence of potential procyclical behaviour of monetary policy (especially in the financial cycle expansion phases) underlines the need for proactive macroprudential policy.

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Have business cycles changed over the last two decades? An empirical investigation

Cited by 35 publications

References 38 publications

Output Growth and Structural Reform in Latin America: Have Business Cycles Changed?

Output Growth and Structural Reform in Latin America: Have Business Cycles Changed?

Reserve Requirements and Loan Loss Provisions as Countercyclical Macroprudential Instruments: A Perspective from Latin America

Monetary Policy and Cyclical Systemic Risk - Friends or Foes?

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