Business Cycles Accounting for Paraguay

Hnatkovska, Viktoria ; Koehler-Geib, Friederike

World Bank, Washington, DC

关键词: MONETARY POLICY;    CAPITAL MARKETS;    PRODUCTION;    MARKET DISTORTIONS;    LAGS;   

DOI  :  10.1596/1813-9450-7284
RP-ID  :  WPS7284

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This study investigates the role ofdomestic and external shocks in business cycle fluctuationsin Paraguay during 1991–2012. Time-series methods and astructural model-based approach are used to conduct anintegrated analysis of business cycles. First, structuralvector autoregression is used to assess the role played byexternal factors and domestic shocks in driving fluctuationsin gross domestic product through impulse response functionsand variance decompositions. The analysis finds thatexternal shocks such as terms of trade, world interest rateand foreign demand account for over 50 percent of real grossdomestic product fluctuations. Given Paraguay’s strongdependence on agriculture, an analysis is also done for theagricultural and non-agricultural sectors separately. Theanalysis finds that non-agricultural gross domestic productis to a large extent driven by external shocks, whichaccount for over 50 percent of its volatility. In contrast,the volatility in agricultural gross domestic product isprimarily due to shocks to domestic variables, mainly shocksto agricultural output. A further difference between thesectors is that shocks to government consumption are moreimportant for agricultural gross domestic product, whileshocks to the domestic real interest rate play a larger rolein the volatility of non-agricultural gross domesticproduct. Second, the paper investigates the sources ofbusiness cycle fluctuations through the lens of aneoclassical growth model with an agricultural andnon-agricultural sector. The analysis finds some signs ofimprovements, as labor market distortions have declined,firms’ access to credit improved, and agriculturalefficiency rose over time. Nevertheless, challenges remain,as gaps in labor and capital returns between agriculture andnon-agriculture remain large, efficiency in thenon-agricultural sector shows no signs of improvement, andhouseholds’ access to finance has deteriorated.