May 2014, David Rosnick and Mark Weisbrot
Latin America’s economic growth rebound in the 2000s is often attributed to a “commodities boom,” which implies that the region’s growth was stimulated by sizable increases in the price of commodity exports.
This paper looks at whether the data support such a conclusion. It finds that there is no statistically significant relationship between the increase in the terms of trade (TOT) for Latin American countries and their GDP growth. There is, however, a positive relationship between the TOT increase and an improvement in the current account balance. It may be that this allowed countries to avoid balance of payments crises or constraints.