October 05, 2021
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Posted by NCID
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Hernán Seoane, from Universidad Carlos III of Madrid, visited the Navarra Center for International Development to give a seminar about "The trend-cycle connection". He explained that long-run growth in Latin America over the last 50 years has been low and volatile and that reversals in trade balance during sudden stops occur through sharp declines in imports. 

The researcher has developed a theory for the long-run effect of the business cycle and links, understands and quantifies the interaction between long-run growth, financial frictions, and sudden stops in emerging countries, which grow less and are less stable

The model of Prof. Seoane has been mainly applied to Argentina since the 1950s and has found that financial crises have a strong and permanent effect on the trend-cycle connection. 

One of the conclusions of the research is that reversals in trade balance happen during sudden stops when there are great reductions in imports and particularly in imported investment. This has a permanent impact on economic growth because the more capital you import, the faster you will grow. As a result, to a large extent, the trend is the cycle.