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International Development Economics Associates (IDEAs)

This paper examines the relationship between economic growth, macroeconomic policies, and income distribution in Argentina and Brazil from 2003 to 2015. It analyzes the factors affecting growth, such as external constraints and political limits, and explores the role of effective demand in driving economic growth. The paper also discusses the impact of external conditions, such as terms of trade and South-South trade, on the performance of Latin American economies. Furthermore, it examines the implications of exchange rate policies, wage dynamics, investment, and public expenditure on income distribution in both countries.

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International Development Economics Associates (IDEAs)

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  1. International Development Economics Associates (IDEAs) International Conference on Financial Instability and Inequality in an Economically Integrated World Tsinghua Sanya International Mathematics Forum (TSIMF) 22-24 February 2016 Andrés Lazzarini UFRJ (Brazil) – UNSAM (Argentina) alazzarini@gmail.com

  2. Some Notes on Economic Growth, Macroeconomic Policies and in Income Distribution in Argentina and Brazil, 2003-2015

  3. Outline • Intro & theoretical premises • Effective demand principle (Kalecki, Keynes) • External constraints (Structuralist approach) • Political limits (Kalecki 1943) • Period 2003-2015 • Accelerated growth • Argentina: 2003-2008 • Brazil: 2006-2010 • Deceleration • Argentina: 2012-2015 • Brazil: 2011-2015 • Perspectives

  4. Effective demand principle: Kalecki and Keynes • Investment creates savings (and not the other way round) • Demand as engine of growth: consumption, public spending, public and private investment, exports • Limits: • Structural limits (supply conditions): in particular in non industrialized countries (periphery) problems of external constraints • Political limits: more general nature, Kalecki: check on workers’ real income at the expense of lower employment and even lower profit margins

  5. 2000s • Context • Better terms of trade for the periphery • Rise in international reserves • Low interest rates in international capital markets • Remarkableincrease in South-South trade • Decoupling (at leastuntil a veryfewyears ago..)

  6. Better external conditions for countries exporting commodities (developing countries)… • That improvement in part explains the very good performance of some Latin American economies

  7. decoupling Tasas promedio de crecimiento del PBI per cápita a dólares constantes del 2005 por regiones SourceWorld Bank

  8. Terms of trade for Latin America, China and India SourceWorld Bank

  9. International reserves (as a % of GDP) source: World Bank data base

  10. South-South trade Brazil: total exports and exports to China. Chinese share on total Brazilian exports. 1970-2010. Source: COMTRADE data base

  11. Argentina: total exports and exports to China and Brazil. Chinese and Brazilian shares on total Argentinean exports. 1970-2010. Source: COMTRADE data base.

  12. GROWTH RATE

  13. EXPORTS GROWTH RATE

  14. Were external conditions alone the main responsible that help boos the Latin American economies, such as Argentina and Brazil? • One of the debates (at least involving Argentina and Brazil discussion in policy and academic circles) has been around the question of whether it is advisable to promote and keep “competitive” exchange rate policies • But again is exchange rate the most importan variable for growth?

  15. Nominal Exchange rate (Reais-USD)

  16. Job creation in formal sectors

  17. HOUSEHOLDS SPENDING GROWTH RATE

  18. Wage share and Gini coefficient

  19. Unit wage costs (blue) and output per worker (red) in manufacturing sector

  20. Gross capital formation and apparent machinery consumption: GROWTH RATE

  21. Public expenditure growth rate

  22. BRAZIL Key variables：growth rate

  23. Brazil： Public sector Balance

  24. BRAZIL GDP growth rate

  25. Argentina

  26. ARGENTINA：growth rate

  27. ARGENTINA：GDP & Investment growth rates

  28. ARGENTINA：Durable equipment Investment growth rate

  29. ARGENTINA：Private consumption growth rate

  30. ARGENTINA：Fiscal policy impact on GDP growth

  31. ARGENTINA：Real wage growth rate

  32. ARGENTINA：Wage share（％ of GDP）

  33. ARGENTINA：Minimum wage and pensions

  34. ARGENTINA：Nominal wages （growth rate） and inflation

  35. ARGENTINA：Real wage growth rate

  36. ARGENTINA：Social transfers （total and ％growth rate）

  37. Deceleration 2012- 2015

  38. Latam countries：GDP growth rates

  39. ARGENTINA：non－financial private sector foreign assets demand （millions USD）

  40. ARGENTINA：Interest rates differential （domestic vs foreign）

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