Positive natural resource shocks and domestic adjustments in a semi-industrialized economy: Argentina in the 2004-2007 period
AbstractThis paper evaluates the domestic adjustment to recent positive external shocks in Argentina's natural resource sectors. Although there is no single, exclusive determinant of ArgentinaÂ’s fast economic growth in the period 2003-2007, the paper illustrates the favourable contribution of certain economic policies to this outcome.According to counterfactual simulations performed with a dynamic Computable General Equilibrium (CGE) model especially designed to capture structural features of the Argentine economy, export taxes on natural resource products and ArgentinaÂ’s competitive exchange rate policy have counteracted Dutch disease adjustments associated the positive terms of trade shock (which may be contractionary in the medium-term if no economic policies are implemented) contributing to productive and export diversification and to bring about output growth.The analysis also shows that in a context of strong demand impulses spending the income collected with export taxes may not be beneficial for the overall competitiveness of the economy, hence counteracting one of the purposes of the tax policy. This implies, first, that subsidies to producers of wage-goods may be ineffective to control overall price increases, and second, that optimizing the contribution of public investment in infrastructure to improve the competitiveness of the economy requires special attention to the timing of public investment.
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Bibliographic InfoPaper provided by International Institute of Social Studies of Erasmus University (ISS), The Hague in its series ISS Working Papers - General Series with number 1765018709.
Date of creation: 01 Nov 2009
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Argentina; Dutch disease; exchange rate policy; productive diversification; terms of trade;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-16 (All new papers)
- NEP-CMP-2010-10-16 (Computational Economics)
- NEP-LAM-2010-10-16 (Central & South America)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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