Transitory and Permanent Terms of Trade Shocks and the Current Account in Latin American Countries

Alicante

Conferencia; XXIV International conference on Applied Economics. Asepelt (Asociación internacional de Economía Aplicada) 2010; 2010

Asepelt (Asociación internacional de Economía Aplicada)

We investigate if terms of trade influence the current account in Latin American countries, and if the transitory or permanent duration of the shocks matter. Since terms of trade volatility is a major source of instability in these economies, identification of the presence and magnitude of such link is of policy relevance. The duration of terms of trade shocks and the influence of the degree of persistence for 18 Latin American countries during 1976-2007 is assessed using panel regression: the association of both transitory and permanent shocks with the current account is found to be positive and statistically significant.