US uncertainty shocks, credit, production, and prices: The case of fourteen Latin American countries

Abstract

This study investigates the effects of US uncertainty shocks on 14 Latin American countries (LACs), considering the region’s varying levels of dependence on US economic and financial flows. While existing research has focused on developed and larger emerging economies, it has not fully addressed how global cycles in production, credit, and prices might influence the impact of US uncertainty. The findings show that Latin American countries, with their high debt levels and economic diversity, are especially sensitive to US uncertainty, whether real, financial, or policy related. Real and financial uncertainty have more lasting and significant effects on GDP than economic or monetary policy uncertainty. Overall, US uncertainty tends to slow economic activity in the region, though the impact varies between countries. These differences highlight the importance of tailoring policies to individual countries' circumstances. Policymakers in Latin America should consider these findings when designing economic strategies, as understanding the specific sources of uncertainty and their potential impact can help guide decisions on economic management and investment planning. Diversification strategies can also play a role in mitigating the adverse effects of US uncertainty on regional economies.