ARGENTINA’S LOST DECADE AND SUBSEQUENT RECOVERY: HITS AND MISSES OF THE NEOCLASSICAL GROWTH MODEL *

• Main Authors: Edward C. Prescott, Finn E. Kydland, Carlos E. J. M. Zarazaga
• Other Authors: The Pennsylvania State University CiteSeerX Archives
• Format: Text
• Language: English
• Subjects: Alvarez; Argentina; sami
• Online Access: http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.199.2669; http://www.dallasfed.org/latin/papers/2003/lawp0304.pdf

The views herein are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Dallas or the Federal Reserve System. The authors are grateful to Sami Alpanda, Fernando Alvarez, Pedro Amaral, Tim Kehoe, Jim MacGee, Ed Prescott, an anonymous referee and the participants at the Federal Reserve Bank of Minneapolis Conference on Great Depressions in October 2000 for extremely useful and constructive comments and suggestions on an earlier version of this paper. We also wish to acknowledge the diligent research assistance of Elias Brandt and Eric Millis at different stages of this project. We examine the economic depression that Argentina suffered in the 1980s, as well as the subsequent recovery, from the perspective of growth theory, taking total factor productivity as exogenous. The predictions of the neoclassical growth model conform rather well with the evidence for the “lost decade ” depression and at the same time point to a puzzle: Investment did not recover in the subsequent decade of the 1990s nearly as fast as it should have according to that same model.