Positive Natural Resource Shocks and Domestic Adjustments in a Semi-Industrialized Economy: Argentina in the 2004-2007 period

Leandro A. Serino

Research output: Working paperAcademic

Abstract

This paper evaluates the domestic adjustment to recent positive external shocks in
Argentina's natural resource sectors. Although there is no single, exclusive determinant of
Argentina’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 Argentina’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.
Original languageEnglish
Place of PublicationDen Haag
PublisherInternational Institute of Social Studies (ISS)
Number of pages58
Publication statusPublished - Nov 2009
Externally publishedYes

Publication series

SeriesISS working papers. General series
Number484
ISSN0921-0210

Series

  • ISS Working Paper-General Series

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