Creator: Da-Rocha, Jose-Maria., Giménez Fernández, Eduardo Luís., and Lores Insua, Francisco Xavier. Series: Advances in dynamic economics Abstract:
In this paper we will consider a simple small open economy with three assets - domestic capital, foreign securities and public debt - to study the government's incentives to devalue and to repay or default the debt. We show that the announcement of a devaluation is anticipated by domestic agents who reduce domestic investments and increase foreign holdings. Once a government devalues, the expectations vanish and the economy recovers its past levels of investment and GDP. However, in a country with international debt denominated in US dollars if a government devalues it requires a higher fraction of GDP to repay its external debt. In consequence, there exists a trade-off between recovering the economy and increasing the future cost of repaying the debt. Our main result is to show that, as devaluation beliefs exists, a devaluation increase government incentives to default and devalue. We calibrate our model to match the decrease in investment of domestic capital, the reduction in production, the increase in trade balance surplus, and the increase in debt levels observed throughout 2001 in Argentina. We show that for a probability of devaluation consistent with the risk premium of the Argentinian Government bonds nominated in dollars issued on April 2001 the external debt of Argentina was in a crisis zone were the government find optimal to default and to devalue.
Keyword: South America, Default, Argentina, Latin America, Devaluation, and Debt crisis Subject (JEL): F30 - International finance - General, E60 - Macroeconomic policy, macroeconomic aspects of public finance, and general outlook - General, and F34 - International finance - International lending and debt problems
Creator: Bergoeing, Raphael., Hernando, Andrés., and Repetto, Andrea. Series: Advances in dynamic economics Abstract:
We estimate the effects of policy distortions on aggregate productivity. Based on a model of plant production and productivity uncertainty and heterogeneity, and using Chilean manufacturing data, we focus on the effect of taxation on the exit behavior of plants. We find that taxes do distort the liquidation decisions of firms, suggesting that policy distortions reduce the extent to which factors are reallocated towards the most productive plants. Our results have important consequences for growth and development, as policies that alter the measure of plants that operate in equilibrium change the short-run response of output to exogenous shocks and the long run level of aggregate TFP. In particular, we find that the amount of productivity lost due to excessive plant shutdowns are very large.
Keyword: South America, Exit behavior of firms, Chile, Latin America, Taxation policy, and Total factor productivity Subject (JEL): H25 - Taxation, subsidies and revenue - Business taxes and subsidies and E23 - Macroeconomics : Consumption, saving, production, employment, and investment - Production
Creator: Huggett, Mark. and Ospina, Sandra. Series: Productivity and the industrial revolution Abstract:
A number of theoretical models of technology adoption have been proposed that emphasize technological switching, loss of expertise and subsequent technology-specific learning. These models imply that measured productivity may initially fall and then later rise after the adoption of a new technology. This paper investigates whether or not this implication is a feature of plant-level data from the Colombian manufacturing sector. We regress measures of productivity growth at the plant level on a plant-specific measure of technology adoption and its lagged values. We find that...
Keyword: Manufacturing, Embodied, Colombia, South America, Productivity, Technology, and Latin America Subject (JEL): D24 - Production and organizations - Production ; Cost ; Capital and total factor productivity ; Capacity, O14 - Economic development - Industrialization ; Manufacturing and service industries ; Choice of technology, L60 - Industry Studies: Manufacturing: General, and O33 - Technological change ; Research and development - Technological change : Choices and consequences ; Diffusion processes