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

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. Instituto de Investigaciones Económicas