By Fabian Amico, Alejandro Fiorito and William Hang
The economists seem to exhibit and share some common arguments true-intuitive and indisputable truths: the belief in the ineffectiveness of expansionary fiscal or monetary policies, criticism of the failed attempt to grow "above potential output, the irresponsible (inflation) increased use of installed capacity, provided inadequate (low) amount of investment, and overall-invalidation of any attempt to instigate growth discretion without respecting the autonomous dynamics of potential output, ie, an attempt that would promote a widening gap between the pace of expansion demand and the speed at which you move the global supply of the economy. This would explain later high inflation and strong growth of imports.
This paper will attempt to show what is wrong with these findings and the persistent "massive failure of forecasting, and propose an alternative analytical framework within which the recent Argentine growth can be explained positively, no need to consider a - -anomaly or a paradox.
If conventional models are those that are basically wrong, that's not the fault of reality. Rather, it requires another interpretation model will be consistent. For it is inevitable to refer, albeit briefly, to own established theory of growth. With the contribution of Solow (1956) began what may be described as the "catch neoclassical growth theory.
Since then dismissed the possibility of failure of effective demand, while promising theory that macroeconomic balance should match the economy's potential output determined by supply. The emergence of neo-classical endogenous growth theory in the mid 80's continued the same process-captura.Sin however, endogenous growth theory of Solow participates in the failure to remove the focus on the supply side considered the source of growth.
As Setterfield says, "endogenous growth theory is indeed able to link the demand with the growth rate, but this connection is peripheral. The behavior of aggregate demand is generally seen as an unnecessary and importance of growth analysis (Setterfield, 2007). However, this captures all abolished the current landscape theory of Keynesian-inspired growth.
The end result is that growth is now represented as a clear process driven by the supply-side. That is, growth theory is defined as a theory of accumulation physical capital, the progress of the capabilities and population, and the efficiency with which these-factors are employed. Thus, growth is a phenomenon entirely related to supply conditions in the economy.
This work aims to question this general approach in order to determine, especially in the case of Argentina, a set of empirical regularities (or "stylized facts) that can only be explained consistently from an alternative scenario, where demand plays a key role not only in the short-term fluctuations, but also in determining the trend of long-term growth, setting the path of potential output. In light of this approach, as discussed in this paper, the process of growth experienced by Argentina in recent years, emerge as an entirely natural process, without any trace, paradoxical or "miraculous.
Basically, the theories of demand-led growth identifies a double impact on demand growth rates.
First, we start to admit that there is insufficient effective demand, even in the long term. That is, the economy tends towards full employment spontaneous potential (or its rate-natural).
Second, the level and rate of growth in demand decisively influence the effective development of productive resources (and thus on potential output of the economy) through time. In this context, effective demand is important not only because of its influence on the rate of utilization of productive resources (and hence on the degree of closeness between the rate of actual output and potential output of the economy), but also has a significant impact on the quantity and productivity of inputs, and therefore impacts on the same path of potential output.
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This paper is organized as follows. In addition to this introduction, Section 2 discussed and reviews the debate over the existence of unit roots in GDP and its main implications. The Section 3 discusses the effects Okun and Verdoorn making estimates for Argentina's economy, while a critical review of the concept of "natural rate of unemployment. The Section 4 discusses the relationship between investment and growth, and the notion of normal use of installed capacity. Proposes a model for reproductive investment accelerator in Argentina and performed an econometric estimation on the matter.
The Section 5 defends the notions of non-neutrality of money and endogeneity of the currency, using views of neocartalismo, and rescuing the Post Keynesian approach, especially as applied to open economies and their criticism of the famous trilemma money. The Section 6 presents a model that articulates the stylized facts highlighted in the previous sections. We present a model more abound type to specify the relationship between potential output and demand in the long term. Finally, Section 7 provides some brief concluding remarks and especially the policy implications of the work.
To see all Working Paper "Product potential and demand in the long term: Stylized Facts and reflections on the recent Argentine case"
Source: CEFID-Ar
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