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IFCI-SA. An International Financial Conditions Index for South American Economies

Author

Listed:
  • Conrado Brum Civelli

    (Banco Central del Uruguay
    Universidad Complutense de Madrid
    Universidad de la República Oriental del Uruguay)

  • Alejandro Fried Gindel

    (Banco Central del Uruguay)

  • Alfredo Garcia-Hiernaux

    (Universidad Complutense de Madrid)

Abstract

The Russian invasion of Ukraine in early 2022, triggered a wave of risk aversion in the global financial markets. However, in contrast to previous events, South American emerging economies experienced limited impact to this more restrictive global financial environment. To assess the financial conditions of these economies over time, particularly Brazil, Chile and Uruguay, we propose an International Financial Conditions Index for South American economies (IFCI-SA), built from a Dynamic Factor Model. This index includes standard variables provided by the literature, along with sovereign debt risk premia and the most relevant commodity prices for these economies. We use our indicator to study the influential role played by commodity prices in the financial conditions of South American emerging economies from October 2007 to May 2022, paying particular attention to the financial implications stemming from the conflict in Ukraine.

Suggested Citation

  • Conrado Brum Civelli & Alejandro Fried Gindel & Alfredo Garcia-Hiernaux, 2023. "IFCI-SA. An International Financial Conditions Index for South American Economies," Documentos de trabajo 2023006, Banco Central del Uruguay.
    • Handle: RePEc:bku:doctra:2023006
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    File URL: https://www.bcu.gub.uy/Estadisticas-e-Indicadores/Documentos%20de%20Trabajo/6.2023.pdf
    File Function: First version, 2023
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    Keywords

    International Financial Conditions; South American Economies; Emerging Economies; Dynamic Factor Model;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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