Impact of External Shocks on Peru's Economic Growth, 2000-2021
Authors: Crispín Angel Renato Meneses , Untiveros José Luis León , Silva Omar Cosme , Peréz William Moises Cruzado 
Published: November 2024

Objective: To analyze the impact of China's GDP growth and an international oil price shock (external shocks) on Peru's growth rate, terms of trade, private investment, exports and unemployment for the period analyzed.

Originality/Value: This study contributes to the literature on the dependence of a small economy on external factors, verifying through an econometric analysis the implications of an external shock that will be relevant for economic policy decision makers, academia and globalized economic culture. The relevance and value of this research are evidenced by quantifying the impacts of a large economy like China on variables such as terms of trade, private investment and Peru's GDP growth rate.

Method: It is quantitative and exploratory with 4 variables, China's GDP growth rate, terms of trade, private investment and Peru's GDP growth rate; It is exploratory because it will give us an overview or knowledge of the behavior of China's GDP growth rate, terms of trade and private investment and their impact on Peru's growth rate from 2000 to 2021. The variables explained are: China's GDP growth rate (tCreChin), terms of trade (tInt), private investment (inv Priva). Explanatory variable: Peru's GDP growth rate (tCrePerú). The design is non-experimental of a correlational type, the population includes data from the 04 variables for the years 2000-2021, each with 22 observations that were extracted from the 21 years analyzed, extracted from institutional secondary sources BCRP and World Bank (WB). Subsequently, tests will be carried out to verify correlation, stationarity and heteroscedasticity in the variables and the estimation of the model parameters for several alternatives or possible combinations of factors. In each case, the “t” test, the “F” test will be performed and the coefficient of determination R2 will be calculated, to determine the best fit. And finally, the best model will be selected for forecasting purposes.

Results: The response of GDP to a shock of the GDP variable of China has a positive impact from period 1-3, on the other hand the IT variable has a positive impact from period 1. Another relevant aspect achieved is that in 10 years, 51% of the variability of Peru's economic growth depends on the variability of China's growth, 2.20% of the variability of Peru's economic growth depends on the variability of the IT variance and 1.48% of the variability of Peru's economic growth depends on the variability of private investment.

Discussion: Our results find similarity with studies by Guevara and Yamaca (2021) and Chávez (2020) et.al., since an external shock is positive and explains a high percentage of historical variability. A shock to China's GDP growth has a greater effect on Peru's GDP growth; and financial shocks reduce domestic GDP growth. On the other hand, Peruvian monetary policy is synchronized with the behavior of the American FED to mitigate the adverse effects of external factors. In our study we use a VAR demonstrating the influence of China's economic growth, the terms of trade, Peruvian GDP and private investment. Finally, the findings indicate that the impacts of external shocks on economic growth are more long-term than short-term, and also reveal the existence of fragility in the international economy that can be opportunities on the side of raw material prices.