Scielo RSS <![CDATA[Latin american journal of economics]]> vol. 52 num. 1 lang. pt <![CDATA[SciELO Logo]]> <![CDATA[<b>REEXAMINING THE LINK BETWEEN INSTABILITY AND GROWTH IN LATIN AMERICA</b>: <b>A DYNAMIC PANEL DATA ESTIMATION USING K-MEDIAN CLUSTERS</b>]]> We estimate a dynamic panel data model to assess the relationship between different levels of instability-proxied by growth volatility and inflation- and growth in Latin America from 1960 to 2011. Outlying observations could be mistakenly treated as thresholds or regime switch. Hence we use k-median clustering to mitigate the outlier problem and properly identify "scenarios" of instability. Our key findings are that while high inflation is harmful, low inflation is in fact positively related to growth. Volatility is also found to be significant and negative, but with no differential effect- between low and high levels-on growth. <![CDATA[<b>A CLUSTER ANALYSIS OF FDI IN LATIN AMERICA</b>]]> This study contributes to the literature on FDI in Latin America using cluster analysis, a technique rarely employed in studies on this topic, to examine the FDI performance of Latin American countries. The empirical findings reveal three clusters in 2011, compared to just two in 2005. The cluster with better FDI performance (Chile, Panama, Uruguay, and Costa Rica) also performs better in terms of variables such as market size, trade openness, and human capital. Between 2005 and 2011 Argentina left the best-performing cluster and the cluster with poorer performance split into two, indicating heterogeneous evolution of economies in the region. <![CDATA[<b>FOREIGN DIRECT INVESTMENT IN LATIN AMERICA AND THE CARIBBEAN</b>: <b>AN EMPIRICAL ANALYSIS</b>]]> Competition for foreign direct investment (FDI) among developing countries has intensified in recent years. Using a sample of 68 developing countries across different regions, with data from 1975-2005, this paper investigates whether Latin America and the Caribbean (LAC) differs from non-LAC regions in regard to determinants of FDI; the evidence suggests that there are differences. In particular, the stock of infrastructure attracts FDI to LAC and constraints on the executive and high debt discourage FDI to non-LAC. These findings are robust to sample size, different estimators, endogeneity, and country fixed effects. <![CDATA[<b>A NOTE ON THE S-CURVE DYNAMICS OF COMMODITY TRADE BETWEEN BRAZIL AND THE UNITED STATES</b>]]> The S-curve hypothesis postulates that the correlation coefficient between the current exchange rate and past trade balance values may be negative. However, the correlation between the current exchange rate and future values of the trade balance may be positive. Previous research using aggregate trade flows between Brazil and rest of the world find weak support for the curve. When we disaggregate Brazil's trade flows with the U.S. and investigate 95 industries that trade between the two countries, we find support for the S-curve in 51 industries. Small and large industries and durable and non-durable commodities are found to benefit from currency devaluation. <![CDATA[<b>U.S. MONETARY POLICY'S IMPACT ON LATIN AMERICA'S STRUCTURE OF PRODUCTION (1960-2010)</b>]]> This paper examines the effects of U.S. monetary policy on Latin America's production structure before two economic crises, specifically the effects of monetary policy on the real economy at the industrial level. Changes in the federal funds rate produce uneven effects on output trends across sectors and industries that are more capital-intensive and involved in relatively long-term projects are more sensitive to changes in the federal funds rate. Periods of loose monetary policy result in resource misallocation that is costly to correct during a bust if investment is irreversible, with a particular pattern of economic distortion during an unsustainable boom.