Determinants of Economic Growth in Latin America: Application of Bayesian Model Average (BMA)

Abstract

The Latin American region has been characterized by low growth in recent decades, for this, different empirical studies have been developed to identify both microeconomic and macroeconomic elements that influence its performance. The heterogeneity of the results, from an empirical point of view, generates a problem of uncertainty, due to the large number of suggested determining factors. Thus, in order to reduce uncertainty, the Bayesian Model Average (BMA) methodology is proposed. Twenty-seven possible determinants are considered in a sample of 19 Latin American countries covering the period 1996-2021. In the same way, the BMA with instrumental variables (IVBMA) is used to consider possible endogeneity problems that have their origin in the reverse causality of some explanatory variables. The results show some economic and institutional factors significant to understand economic growth in Latin America. Additionally, a non-linear relationship of corruption with economic growth is found.