Regional shocks and the performance of the Uruguayan economy, 1974-1997

Resumen

The purpose of this paper is to examine how the economic instability in Argentina and Brazil affected key Uruguayan variables during the period 1974-1997, and to identify the channels through which regional shocks were transmitted to the small economy. Concern over these issues has been recently heightened in Uruguay due- to the growing difficulties faced by the Brazilian stabilization program (Real plan) and the discussions of the long-run viability of the Argentinean stabilization program (Convertibility plan). We believe that isolating the effects of regional shoks is important not only for empirical considerations but also for normative issues.