Volume 44, Number 174,
July-September 2013
Central America: The Urgency of Coherent
Commercial Diversification
Juan Sebastián Castillo, Esther Aguilera and Carmen García Cortijo
RESULTS

The models represented in expressions (6), (16), (19) and (20) were estimated using data from 1993 to 2009, taken from the World Bank (gdp series), the WITS (international exports, by product and by geographic zone) and the 2010 eclac Yearbook (Intra-Regional exports series).

The estimation method used was weighted least squares with correction for heteroskedacity of cross-section weights. It was also necessary to include the endogenous variable (gdp(-1)) and convert variables into natural logarithms in order to correct for auto correlations.

All estimates presented minimum values of 0.99 for the R2 determination coefficient. With the t-Student and Snedecor’s F-tests, the conclusion was reached at 95% significance for the estimated parameters, both in general for individual coefficients and taken as a set. Finally, in contrast with Levin, Lin and Chu, this study concluded that the residuals of the four models were stationary with an associated p-value lower than 0.05.

The estimated equations and their derivations for each model are presented below.

Estimating the General International Commerce Model

The estimated general commerce model (expression 6) was as follows:

(21)

With di= 1 for observations of country i and di = 0 if not.

The terms indicated with a double asterisk were significant at a 95% confidence level: IDP1it, IDP3it, IDGit,f1it and f4it. Overall, the model was apt with a p-value associated to the F-Snedecor of zero, an R2 of 0.99 and stationary residuals with a p-value of zero for the unit root test. In economic terms, it can be deduced that the diversification of raw materials (IDP1it) and manufactured goods (IDP3it) does not contribute to Central American economic growth, given the negative sign in front of these terms. The situation is the opposite for extracted products. Although the diversification of extracted goods has a positive effect on the gross domestic product, its level of diversification is not significant.

In other areas, the coefficient estimated for the geographic dispersion index (IDGit) showed that greater dispersion of exports produces a higher benefit for Central American revenue.

Additionally, it became clear that the Free Trade Agreement (f1it) benefitted Central American gdp, similarly to the rest of Latin America, and that the 2008 crisis (f4it) left its mark on the region. In terms of relations to China (f2it) and the EU (f3it), although these are positive, they were not significant.

Estimating the Sub-Model of International Commerce

Based on these results, the authors proposed a sub-model to better focus on trade relations with principal partners (expression 16). When estimated, the following equation resulted:

(22)

with di= 1 for country i and di = 0 if not.

In econometric terms, this model is appropriate to represent an R2 of 0.99, a p-value for F of zero in joint significance and another p-value of zero for unit roots in the residuals series. From an economic perspective, the only positive results were diversifying trade with China (), while diversifying commerce with the EU was also positive, but not significant. Finally, Central America should be cautious in orienting trade towards the US. The economic crisis is once again significant in this equation.

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 193, April-June 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Moritz Cruz. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: June 27th, 2018.
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