In this paper, Pär Österholm and Jeromin Zettelmeyer investigate the sensitivity of Latin American GDP growth to external developments using a Bayesian vector-autoregressive model with informative steady-state priors.
Conditional forecasts for a variety of external scenarios suggest that Latin American growth is robust to moderate declines in commodity prices and external growth, but sensitive to more extreme shocks, particularly a combined external slowdown and tightening of world financial conditions.
