*Growth and producer prices in Latin America.
Item
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Title
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*Growth and producer prices in Latin America.
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Identifier
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AAI3245099
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identifier
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3245099
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Creator
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Lange, Andrea.
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Contributor
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Adviser: David Laibman
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Date
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2007
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Language
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English
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Publisher
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City University of New York.
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Subject
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Economics, General
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Abstract
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My study is testing a new approach to analyzing the relationship between growth and inflation. Empirical studies have shown that the relationship may be nonlinear. With low and moderate inflation the correlation may be positive, albeit weakly. There is thus a breakpoint above which inflation turns destructive, in line with monetary theory. Previous studies commonly use the consumer price index as a measure of inflation. This study uses the producer price or, as available, the wholesale price index, as well as consumer prices. I examine the nonlinearity of wholesale or producer prices. The main finding is that the correlation between changes in producer prices and the change in GDP is positive, once changes in consumer prices are included in the model, with differing levels of significance, and even without cutting off the high inflation data.;The study thus supports empirically the existing findings of a positive growth-inflation correlation, and it backs them up theoretically. The work is inspired by a model that is based on input-output analysis, and on the distinction between a capital goods sector and a consumer goods sector, even if it is multi-sector multi-goods. One of its implications is that higher producer prices correlate positively with higher growth. The model has a second explanatory variable, capital productivity. Overall this model is at odds with standard neo-classical theory where growth is explained with additions in labor and capital and a rest factor.;I do not attempt to "explain" growth, therefore my sensitivity analysis is somewhat limited, unlike in previous studies, in which many control variables are used. The variables used are annual change in gross domestic product, annual change in capital productivity, annual change in producer/wholesale prices, and in consumer prices. The econometric technique used is Ordinary Least Squares, with some quadratic formulation, to test for nonlinearity. I also use lags, and a Granger causality test. I mainly perform time series analysis, so as to not lose the individuality of results for specific countries. Panel data are used to find country and time fixed effects.;The geographic focus of the study is Latin America. The countries studied are all the South American countries and the Central American economies. Caribbean countries are not included. This makes 14 countries, as wholesale prices are not available for two of the six Central American countries, Nicaragua and Honduras. The time period is roughly 1960-2000, which in most cases yields 40 observations. For some countries, the time period is shorter, for lack of data.;Results indicate that the correlation between producer price changes and GDP changes is positive, once consumer price changes are controlled for, and that there are breakpoints in the wholesale price inflation-growth relationship.
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Type
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dissertation
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Source
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PQT Legacy CUNY.xlsx
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degree
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Ph.D.
