The macroeconomic effects of oil shocks in three Latin American economies

Autor:Juan Carlos Alarcon Galarza - Juan Carlos Molero García - Fernando Pérez de Gracia
Cargo:Catedrático de Economía de la Universidad de Navarra, España - Licenciado en Economía, Máster en Economía y Finanzas por la Universidad de Navarra, España - Profesor Asociado de Economía en la Facultad de Economía y Administración de Empresas de la Universidad de Navarra en Pamplona, España
Páginas:145-171
RESUMEN

In this paper we study the impact of oil price shocks on real economic activity and inflation rates in three Latin American economies (Brazil, Colombia and Peru) using a Vector AutoRegressive (VAR) model over the period 1991:M01-2014:M01. We also consider different oil shock specifications. We find a strong and prolonged increase in inflation in Brazil after an oil price shock and a negative... (ver resumen completo)

 
145
Abstract:
In this paper we study the impact of oil price shocks on real economic activity and
          
using a Vector AutoRegressive (VAR) model over the period 1991:M01-2014:M01.

             
 
that can be explained by the distorted pass-through of oil price shocks to domestic
prices.
Keywords: 
VA R
JEL CODE: F31, F41, Q43
THE MACROECONOMIC EFFECTS OF OIL SHOCKS IN
THREE LATIN AMERICAN ECONOMIES*
Juan Carlos Alarcon Galarza*
Juan Carlos Molero García**
Fernando Pérez de Gracia***
 
          

*** Profesor Asociado de Economía en la Facultad de Economía y Administración de Empresas de la


Juan Carlos Alarcon - Juan Carlos Molero - Fernando Pérez de Gracia
Cuestiones Económicas Vol. 26, No. 2:2, 2016
146
I. INTRODUCTION
Non-OECD countries in 2014 accounted for more than half of total world
oil consumption. Consumption of oil in South and Central America have increased
almost 20% in the last 5 years, from 2010 until 2015 oil consumption increased by
1 million of barrels per day, reaching around 7 million of barrels per day in 2014
(Annual Energy Outlook, 2014). Production has experienced as well an increase but
of a smaller amount: 0.6 million of barrels per day, an increase of around 13% in 5
years, reaching approximately 8.5 million of barrels per day in 2014 (Annual Energy
Outlook, 2014).
According to the World Bank, in recent years GDP average growth rates in
Latin-American economies have been around 2% and 2.5%, far from the rates of
5% growth in the period 2003-2012 (World Bank, 2015). Among others, the main
reasons are the decreasing commodities prices, the slower Chinese economy and
lower investments. There is strong evidence of poor growth in resource-rich countries
called sometimes the “natural resource curse”. The experience shows that in Latin-
America this has been a big issue in the post-world war II period and nowadays is
a major structural problem (Sachs and Warner, 2001). There is an imperious need
for countries understand and deal with this dependence problem in order to attain a
more sustainable development (World Bank, 2006).
Developing countries oil demand is steadily increasing and exporters often
face a hidden but important problem that arises by focusing too much on the
production of oil and not letting other important industries mature. The volatility
of oil prices is increasing and price shocks are becoming more and more common,
leaving countries severely exposed to these variations. Due to the importance of oil
for the global economy, oil shocks are a topic that should be carefully addressed by
both oil importing and exporting countries.
In this paper we study the impact of oil price shocks on the real economic

Colombia and Peru). Brazil was the largest oil producer in South America in 2014,
while Colombia was the third. Peru in 2014 was the sixth oil exporter economy
in South America. These three countries together accounted in 2014 for 37% of
the total oil production of Central and South America (Annual Energy Outlook,
2014). On the consumption side in 2013 Brazil was the largest consumer of oil in
Central and South America, accounting alone for 42.3% of total oil consumption
            

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