Relative prices, income distribution and stabilization plans : The Argentine experience, 1967–1970

The objective of this paper is to analyze the anti-inflationary plan applied in Argentina in 1967, a plan which did not eliminate inflation. With respect to the failure of this plan, two different explanations have been offered: one according to which the problems were essentially political, and another, which maintained the program contained basic technical flaws. From the analysis of this paper it is clear that the truth lies much closer to the second explanation. In the last section of the paper, economic policy recommendations relevant for future anti-inflationary plans, be they implemented in Argentina or in other inflationary economies, are presented.     

LATIN AMERICAN EXCHANGE RATE DEPENDENCIES: A REGULAR VINE COPULA APPROACH

This study implements a regular vine copula methodology to evaluate the level of contagion among the exchange rates of six Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico, and Peru) from June 2005 to April 2012. We measure contagion in terms of tail dependence coefficients, following Fratzscher's (1999) definition of contagion as interdependence. Our results indicate that these countries are divided into two blocks. The first block consists of Brazil, Colombia, Chile, and Mexico, whose exchange rates exhibit the largest dependence coefficients, and the second block consists of Argentina and Peru, whose exchange rate dependence coefficients with other Latin American countries are low. We also found that most of the Latin American exchange rate pairs exhibit asymmetric behaviors characterized by nonsignificant upper tail dependence and significant lower tail dependence. These results imply that there exists contagion in Latin American exchange rates in periods of large appreciations, whereas there is no evidence of contagion during periods of currency depreciation. This empirical regularity may reflect the “fear of appreciation” in emerging economies identified by Levy‐Yeyati, Sturzenegger, and Gluzmann (2013). (JEL C32, C51, E42)     

Microeconometric decompositions of aggregate variables: an application to labour informality in Argentina

This article illustrates the use of microeconometric decomposition techniques to characterize changes in aggregate variables. In particular, it studies the effect of changes in the employment structure on the labour informality rate for salaried workers in the greater Buenos Aires area (Argentina). To that aim it computes the difference between the informality rate at moment t and the rate that results from combining the population at moment t with the parameters estimated at moment t that link observable individual characteristics to the informality decision. The article concludes that the deep change of the employment structure in Argentina during the 1980s and the 1990s has had a significant but minor effect on the labour informality rate.     

Trade Effects of European Union Enlargement: an ex post model of trade between Spain and Latin America

Past research on European Union (EU) Enlargement has tended to neglect the effects on trade with non-preferred trading partners. This paper examines the consequences of EU enlargement on trade between Spain and the Latin American countries with which it has traditional economic and cultural ties. An import demand functions model was estimated for the period 1964–93. The country-level results showed that Spanish accession to the EU only had large adverse effects on its imports from Argentina. The results for non-agricultural products indicated a general absence of negative effects on Spanish imports. The aggregate results from the ex post model provide support for some, but not all, of the ex ante predictions of previous studies.     

Socioeconomic Index for Income and Poverty Prediction: A Sufficient Dimension Reduction Approach

The present paper introduces a novel method for the construction of Socioeconomic Status (SES) indices that are specific to a target variable of interest. It is based on the Sufficient Dimension Reduction (SDR) paradigm and uses a factorized model-based approach to simultaneously deal with predictor variables of mixed nature (i.e. quantitative, binary, and ordinal), which are usual in microeconomic data. These SES indices also identify relevant predictor variables using a two-step regularized matrix factorization approach. Using data from household surveys for Argentina (Encuesta Permanente de Hogares-EPH), the proposed method is compared with other existing dimension reduction algorithms such as standard Principal Component Analysis (PCA) and its version for mixed variables, regression on the full set of variables and Least Absolute Shrinkage and Selection Operator regression (LASSO).     

The effect of macroeconomic variables on the opening of antidumping measures: A robust analysis for Brazilian and Argentine economy

This paper analyzes the influence of macroeconomic factors on the introduction of antidumping (AD ) cases in Brazil and in Argentina. Since this type of research does not have large samples, the relevant variables were selected via Sala‐i‐Martin's (1997) test. The results, estimated using Poisson models, revealed that Brazil and Argentina are influenced by macroeconomic factors. However, the traditional (aggregated) models tend to minimize this influence on Brazil and overestimate it on Argentina. We also found that domestic and foreign income growth, exchange rate devaluation, and a reduction in domestic prices could reduce the number of AD cases in both countries. Therefore, there is evidence that these countries are using the AD law as a political tool, shifting it from its main objective of avoiding unfair trade.     

Relative prices and inflation: new evidence from different inflationary contexts

This paper analyses the relationship between inflation and relative price variability, in the direction of the latter, in two countries with very different inflationary experiences: Argentina and Spain. To address this objective, using disaggregated price indexes (the Wholesale Price Index for Argentina and the Consumer Price Index for Spain), we delimitate different inflationary regimes and compute a set of regressions for each country. Our results suggest evidence in favour of the non-neutrality of inflation (mostly in hyperinflation periods) and do not support either the menu costs or the signal extraction approaches. We also detect significant structural changes in the relationship depending on the inflationary regime.     

Merchant and regulated transmission: theory, evidence and policy

Economists acknowledge the problems of regulated transmission but have different views on the likely efficiency of merchant transmission. This paper first examines the evidence on alleged market failure and regulatory failure as experienced in practice in Australia, where there have been both regulated and merchant interconnectors. Merchant transmission has generally not exhibited the standard examples of market failure but regulated transmission generally has exhibited the standard examples of regulatory failure. Imperfect information??more specifically, in the form of lack of coordination??has often been a challenge whatever the approach. Experience in Argentina suggests that transactions costs are not a barrier to negotiation and efficient investment determined by users. Policy should seek to improve the regulatory framework and to remove barriers to private initiatives. An important role for regulation is to facilitate coordination between potential providers and users of transmission lines.     

As times goes by. A dynamic impact assessment of the innovation policy and the Matthew effect on Argentinean firms

ABSTRACT

The objective of this paper is to analyse the impact of public funds for innovation on firm’s capabilities, innovative dynamics and economic performance. A large stream of literature about the evaluation of public funds is focused on testing the existence of additionality effects on investments and results. This paper aims to provide evidence about other dimensions of the firm that public policy can alter, with focus on the time window between the treatment and the impact, and the role of the Matthew effect (recurrence) in this process. The empirical exercise is based on a dynamic panel data made of 1465 firms (3337 observations) that applied to the Argentinean Technological Fund (FONTAR), which is the main public fund for innovation in Argentina, between 2007 and 2016. Results show short-term effects of accessing to FONTAR on firms’ capabilities, medium-term effects on innovation efforts and long-term effects on productivity. Even though the effect on productivity is larger among recurrent firms, the differences among recurrent and non-recurrent firms are not conclusive in case of capabilities and innovation efforts. All in all, this research provides evidence about the ‘when’ of public policy and the need to look beyond input additionality effects when analysing its impact.     

Capacities,innovation and feedbacks in production networks in Argentina

This paper is based on an application of the complex systems approach to economics with the objective of exploring the micro- and meso-mechanisms of development. Under this approach, innovation can be seen as an emergent property that depends on micro interaction and on specificities of macro structure. This study emphasizes that the micro interactions can be described by the feedback mechanisms between the absorption and connectivity capacities of firms, and the macro structure by processes of creative destruction, knowledge appropriation and structural change. The paper presents empirical evidence on the feedback loops between absorption and connectivity capacities in production networks in Argentina and their impact on innovation results. This paper concludes that the restrictions on absorption capacity and mainly on connectivity capacity in several production networks in Argentina condition the development of positive feedbacks between the two capacities, and hence the scope of the innovation path.     

Argentina's Feeble Recovery: Insights from a Real Business Cycle Approach

Abstract

Argentina’s GDP increased 30% between 2002 and 2005, prompting optimistic assessments that the country had finally left behind its secular stagnation. However, this strong performance followed a sharp decline in economic activity and therefore could be the manifestation of a bounce‐back effect with no lasting impact on Argentina’s mediocre long‐term growth rates. The paper examines this conjecture with the quantitative discipline imposed by a Real Business Cycle methodology and concludes that the 2002–05 expansion was not only a rebound, but also considerably weaker than the model predicts, a finding not consistent with upbeat views about the country’s long‐term prospects.     

Learning,Large Deviations,And Recurrent Currency Crises*

This article studies a version of Obstfeld's (Journal of International Economics 43 (1997), 61–77) “escape clause” model. The model is calibrated to produce three rational expectations equilibria. Two of these equilibria are E‐stable and one is unstable. Dynamics are introduced by assuming that agents must learn about the government's decision rule. It is assumed they do this using a stochastic approximation algorithm. It turns out that as a certain parameter describing the sensitivity of beliefs to new information gets small, the algorithm converges to a small noise diffusion process. The dynamics of exchange rate changes are then characterized using large deviation techniques from Freidlin and Wentzell (Random Perturbations of Dynamical Systems, Second Edition, Berlin: Springer‐Verlag, 1998). These methods describe the sense in which the limiting distribution of exchange rate changes is approximated by a two‐state Markov‐Switching process, where the two states correspond to the two E‐stable equilibria. The model is calibrated to the exchange rate histories of Argentina, Brazil, and Mexico. Currency crises in these countries resemble the predicted “escape routes” of the model. A key feature of these escape routes is that expectations of a devaluation erupt suddenly, without large contemporaneous shocks. This is consistent with evidence showing that crises are often poorly anticipated by financial markets.     

A non-parametric analysis of ERM exchange rate fundamentals

In this paper we present evidence concerning the number of common stochastic trends in three major ERM exchange rates. The results indicate the presence of a single common trend driving these currencies and from this we suggest that the common trend can be considered as the non-parametric fundamentals for the three selected currencies. Using a non-parametric technique, the Alternating Conditional Expectations (ACE) algorithm, we obtain evidence for the existence of non-linearities for two out of three currencies with a functional form, related to the estimated non-parametric fundamentals, close to the S-shape given by the basic target zone model.      

Efficiency Wages and Work Incentives in Urban and Rural China

This paper examines incentive-wage effects for production and for managerial/technical workers in both urban and rural Chinese nonagricultural enterprises. We report strong evidence of productivity-enhancing wage behavior among enterprises in all ownership categories. There is also evidence that firms paying higher efficiency wages experience less shirking among their employees. We find that the profit-maximizing potential of incentive-wage setting is not fully exploited, although there is weak evidence that joint ventures come closer to profit-maximizing behavior at this margin of wage/employment behavior than do collectives or state-owned enterprises. J. Comp. Econ., December 2001, 29(4), pp. 645–662. The Ohio State University, 1945 North High St., Columbus, OH 43210 and University of Hawaii at Manoa, Honolulu, Hawaii 96822. © 2001 Elsevier ScienceJournal of Economic Literature Classification Numbers: P23, J31, O15.     

Purchasing power parity: Evidence from developing Countries

This paper utilizes the dynamic error-correction model (DECM) to examine the issue of purchasing power parity (PPP) for 11 developing countries (Argentina, Bolivia, Colombia, Cote d'Ivoire, Ecuador, Guatemala, Kenya, Nigeria, Peru, South Africa, and Venezuela). For comparison purposes, evidence from the traditional unit root methods of the augmented Dickey-Fuller (ADF) and Phillips-Perron is presented. The results from the conventional unit root tests failed to find evidence of PPP in all of the cases. However, the results from the generalized error-correction model detected evidence of PPP for nine out of the 11 countries under consideration. Based on these results, it was concluded that PPP holds in the long-run for the sample countries and that the implicit restrictions associated with unit root tests prevented earlier studies from finding evidence in support of PPP theory.The views expressed in this paper are those of the authors only. They do not reflect the views of the World Bank.     

Viewpoint: Empirical evidence and tax policy design: lessons from the Mirrlees Review

Abstract This paper examines the role of evidence in drawing up the recommendations for tax reform in the Mirrlees Review. The arguments are organised loosely under five related headings: (i) Key margins of adjustment. (ii) Measurement of effective tax rates. (iii) The importance of information and complexity. (iv) Evidence on the size of responses. (v) Implications from theory for tax design. Although the Mirrlees Review focuses on all aspects of tax reform, the focus is this paper is on the taxation of earnings with some examples drawn from the taxation of consumption and savings.     

Bond yield uncertainty and the demand for money : A comment

The purpose of this paper is to reconsider the work recently reported by Amihud that the demand for money is an increasing function of the risk of holding bonds. Our evidence from testing annual and quarterly Cambridge k and demand-for-money equations cannot confirm the positive and significant bond-yield uncertainty coefficient reported by Amihud in a semi-annual Cambridge k equation.     

Uncertainty and Investment: Evidence from Australian Firm Panel Data

This paper investigates the key drivers of fixed firm investment of listed non‐financial companies in Australia over the period from 1987 to 2009. A Tobin's q model of investment is augmented to account for the effect of economic uncertainty on the investment decision. The effects of Tobin's q, sales and cash flows on firm investment rate are also analysed and discussed. Consistent with existing literature, this research finds clear evidence of negative effects of both macroeconomic and firm idiosyncratic uncertainty on Australian firm investment. However, evidence also shows that firm‐specific uncertainty is more important in explaining firm investment than macroeconomic uncertainty.     

Productivity,Structural Change and Latin American Development

We calibrate a simple neoclassical growth model adapted to illustrate a process of structural transformation or industrialization to a group of nine South American countries. The paper shows that low levels of agricultural productivity can substantially delay the process of industrialization, which, together with low levels of non‐agricultural productivity observed in recent decades, satisfactorily explains the significant differences in gross domestic product (GDP) per capita levels among the countries in our sample. The results suggest that Argentina underwent the process of industrialization first followed by Uruguay, Chile, Brazil, Colombia, Ecuador, Peru, Paraguay and Bolivia. The model predicts that the ranking of these countries in terms of GDP per capita would follow this order until convergence occurs. The empirical evidence confirms the prediction of the model with the exceptions of Uruguay and Chile which caught up with Argentina in terms of GDP per capita levels in the late 1980s.