Threshold effects of terms of trade on Latin American growth |
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Institution: | 1. Federal Government of Brazil, Ministry of the Economy, National Treasury Attorney’s Office in the State of Santa Catarina, Rua Arcipreste Paiva 107, Centro, Florianópolis, SC, 88010-530, Brazil;2. Department of Economics and Finance, University of Texas Rio Grande Valley, 1201 West University Drive, Edinburg, TX, 78539, USA |
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Abstract: | This paper investigates nonlinear relationships between terms of trade volatility (totvol) and economic growth in 14 Latin American economies from 1997 to 2014. In the 2000s, Latin American countries experienced accelerated economic growth often attributed to commodity price booms. We split the sample into two regimes based on totvol thresholds determined by bootstrap techniques. Fixed effects, instrumental variable and dynamic panel regressions address endogeneity in trade growth, subject to traditional economic channels such as domestic investment, population growth, exchange rate, government size, and institutions. We find statistically significant thresholds and stronger trade-growth links during the 2000s commodity boom and in larger economies. |
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Keywords: | Economic development Latin America Panel data Threshold techniques Trade-growth nexus |
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