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<p>As a small, open economy, Uruguay is highly exposed to international and regional shocks that affect its domestic uncertainty. To account for this phenomenon, we construct geometric indices of economic uncertainty, based on quarterly data from the qualitative industrial survey on their expectations regarding the economy and the export market, between 1998 and 2022. Based on the estimated linear ARDL models that showed negative but weak relationships between the uncertainty indices and the GDP cycle, we test for the existence of structural breaks in these relationships. Wald tests carried out on the re-specified models (considering non-linearities around the break) confirmed the significance of one structural break in the third quarter of 2003 in the model of the export market uncertainty. After this date, the negative influence of uncertainty on the macroeconomic cycle fades. The evidence of a differential impact before and after this date remains when controlling for the variability of domestic prices of non-tradable goods. Two main conclusions emerge from these results. First, the results highlight the evidence that the Uruguayan economy processed relevant transformations that made it less vulnerable after 2003. Second, the importance of business expectations about the future of export markets has to be stressed, particularly in small, open and emergent economies.</p>

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Structural Breaks in Uncertainty and the Business Cycle in a Small and Open Economy

  • 期刊论文

  • 发表日期：

    2025年12月18日

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  • Bibiana Lanzilotta,
  • Gabriela Mordecki,
  • Pablo Tapie,
  • Joaquín Torres Pérez

摘要

As a small, open economy, Uruguay is highly exposed to international and regional shocks that affect its domestic uncertainty. To account for this phenomenon, we construct geometric indices of economic uncertainty, based on quarterly data from the qualitative industrial survey on their expectations regarding the economy and the export market, between 1998 and 2022. Based on the estimated linear ARDL models that showed negative but weak relationships between the uncertainty indices and the GDP cycle, we test for the existence of structural breaks in these relationships. Wald tests carried out on the re-specified models (considering non-linearities around the break) confirmed the significance of one structural break in the third quarter of 2003 in the model of the export market uncertainty. After this date, the negative influence of uncertainty on the macroeconomic cycle fades. The evidence of a differential impact before and after this date remains when controlling for the variability of domestic prices of non-tradable goods. Two main conclusions emerge from these results. First, the results highlight the evidence that the Uruguayan economy processed relevant transformations that made it less vulnerable after 2003. Second, the importance of business expectations about the future of export markets has to be stressed, particularly in small, open and emergent economies.