MACROECONOMIC PERFORMANCE AND THE COMPLEXITY OF THE EXTERNAL SECTOR. A PANEL VAR ANALYSIS FOR LATIN AMERICA

The fusion of new statistical techniques, enhanced processing capabilities, and data availability has facilitated the development of novel economics research areas based on economic complexity metrics. Recent literature has explored the relationship between economic complexity, understood as the ability of countries to transform inputs into sophisticated products, and various economic variables such as inequality, economic growth, export structure, and renewable energies, among others. In the case of Latin America, there is limited literature on the relationship between economic complexity and relevant economic variables. Following the debt crisis of the 1980s, Latin American countries underwent a process of stabilization and reorganization of economic activity, with an increased emphasis on the external sector. In this context, this study aims to analyze the relationship between the complexity of the external sector and the macroeconomic performance of 17 Latin American countries from 1998 to 2019. To this end, an autoregressive panel is estimated using the Generalized Method of Moments (GMM-PVAR). According to the results, GDP per capita and trade openness positively influence the economic complexity index, while economic growth and capital accumulation negatively affect the index. The findings are robust to including the composition of the external sector in the model.