IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2013-109.html
   My bibliography  Save this paper

Is the Growth Momentum in Latin America Sustainable?

Author

Listed:
  • Mr. Sebastian Sosa
  • Ms. Evridiki Tsounta
  • Miss Marie S Kim

Abstract

A favorable external environment coupled with prudent policies fostered output growth in most of Latin America during the last decade. But, what were the drivers of this strong growth performance from the supply side and will this momentum be sustainable in the years ahead? We address these questions by identifying the proximate causes of the recent high GDP growth and estimating potential growth rates for the period ahead for a large group of Latin American countries based on standard (Solow-style) growth accounting methodologies. We find that factor accumulation (especially labor), rather than growth in total factor productivity (TFP), remains the main driver of GDP growth. Moving forward, given the expected moderation of capital accumulation and some natural constraints on labor, the strong growth momentum is unlikely to be sustainable unless TFP performance improves significantly.

Suggested Citation

  • Mr. Sebastian Sosa & Ms. Evridiki Tsounta & Miss Marie S Kim, 2013. "Is the Growth Momentum in Latin America Sustainable?," IMF Working Papers 2013/109, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2013/109
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=40537
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Christian Daude & Eduardo Fernandez-Arias, 2010. "On the Role of Productivity and Factor Accumulation in Economic Development in Latin America and the Caribbean," Research Department Publications 4653, Inter-American Development Bank, Research Department.
    2. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
    3. William Easterly & Ross Levine, 2002. "It´s Not Factor Accumulation: Stylized Facts and Growth Models," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.),Economic Growth: Sources, Trends, and Cycles, edition 1, volume 6, chapter 3, pages 061-114, Central Bank of Chile.
    4. José de Gregorio & Jong-Wha Lee, 2004. "Growth and Adjustment in East Asia and Latin America," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2004), pages 69-134, August.
    5. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    6. Norman Loayza & Pablo Fajnzylber & César Calderón, 2005. "Economic Growth in Latin America and the Caribbean : Stylized Facts, Explanations, and Forecasts," World Bank Publications - Books, The World Bank Group, number 7315.
    7. Christian Daude & Eduardo Fernandez-Arias, 2010. "On the Role of Productivity and Factor Accumulation in Economic Development in Latin America and the Caribbean," Research Department Publications 4653, Inter-American Development Bank, Research Department.
    8. Susan M. Collins & Barry P. Bosworth, 1996. "Economic Growth in East Asia: Accumulation versus Assimilation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 135-204.
    9. repec:idb:brikps:9174 is not listed on IDEAS
    10. Andrés Solimano & Raimundo Soto, 2004. "Latin American Economic Growth in the Late 20th. Century: Evidence and Interpretation," Documentos de Trabajo 276, Instituto de Economia. Pontificia Universidad Católica de Chile..
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ms. Ghada Fayad & Mr. Roberto Perrelli, 2014. "Growth Surprises and Synchronized Slowdowns in Emerging Markets––An Empirical Investigation," IMF Working Papers 2014/173, International Monetary Fund.
    2. Sethi, Amarjit Singh, 2016. "Sources of Growth in India: Evidence from Punjab and Haryana," Journal of Regional Development and Planning, Rajarshi Majumder, vol. 5(1), pages 15-34.
    3. Raquel Puente & María Antonia Cervilla & Carlos Giovanni González & Nunzia Auletta, 2017. "Determinants of the growth aspiration: a quantitative study of Venezuelan entrepreneurs," Small Business Economics, Springer, vol. 48(3), pages 699-726, March.
    4. Mr. Roberto Garcia-Saltos & Fan Zhang & Iulia Ruxandra Teodoru, 2016. "Potential Output Growth Estimates for Central America and the Dominican Republic," IMF Working Papers 2016/250, International Monetary Fund.
    5. Mr. Christian A Johnson, 2013. "Potential Output and Output Gap in Central America, Panama and Dominican Republic," IMF Working Papers 2013/145, International Monetary Fund.
    6. Don P. Clark & W. Charles Sawyer, 2014. "Stages of diversification in Latin America," Applied Economics Letters, Taylor & Francis Journals, vol. 21(13), pages 893-897, September.
    7. Ms. Evridiki Tsounta, 2014. "Slowdown in Emerging Markets: Sign of a Bumpy Road Ahead?," IMF Working Papers 2014/205, International Monetary Fund.
    8. Cáceres, Luis René, 2021. "Labour productivity and Central American economic integration: the case of El Salvador," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    9. Fossati, Sebastian, 2014. "Output Growth and Commodity Prices in Latin America: What Has Changed?," Working Papers 2014-11, University of Alberta, Department of Economics.
    10. Iván Kataryniuk & Jaime Martínez-Martín, 2019. "TFP Growth and Commodity Prices in Emerging Economies," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(10), pages 2211-2229, August.
    11. Roberto Machado, 2017. "Crecimiento económico e infraestructura de transportes y comunicaciones en el Perú," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 40(79), pages 9-46.
    12. Luis M. Cubeddu & Alexander Culiuc & Ghada Fayad & Yuan Gao & Kalpana Kochhar & Annette J Kyobe & Ceyda Oner & Roberto Perrelli & Sarah Sanya & Evridiki Tsounta & Zhongxia Zhang, 2014. "Emerging Markets in Transition; Growth Prospects and Challenges," IMF Staff Discussion Notes 14/6, International Monetary Fund.
    13. Ms. Pritha Mitra & Amr Hosny & Gohar Abajyan & Mr. Mark Fischer, 2015. "Estimating Potential Growth in the Middle East and Central Asia," IMF Working Papers 2015/062, International Monetary Fund.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mendez-Guerra, Carlos, 2014. "On the Development Gap between Latin America and East Asia: Welfare, Efficiency, and Misallocation," MPRA Paper 62588, University Library of Munich, Germany.
    2. Eduardo Fernández-Arias & Sergio Rodríguez-Apolinar, 2016. "The Productivity Gap in Latin America: Lessons from 50 Years of Development," IDB Publications (Working Papers) 94097, Inter-American Development Bank.
    3. Mendez-Guerra, Carlos, 2020. "Labor Productivity, Capital Accumulation, and Aggregate Efficiency Across Countries: New Evidence for an Old Debate," MPRA Paper 99268, University Library of Munich, Germany.
    4. Peter Paz & Carlos Urrutia, 2015. "Economic Growth and Wage Stagnation in Peru: 1998–2012," Review of Development Economics, Wiley Blackwell, vol. 19(2), pages 328-345, May.
    5. Guillermo Perry & Alejandro Forero, 2014. "Latin America: The Day After Is this Time Different?," Documentos CEDE 12344, Universidad de los Andes, Facultad de Economía, CEDE.
    6. Hummera Saleem & Malik Shahzad & Muhammad Bilal Khan & Bashir Ahmad Khilji, 2019. "Innovation, total factor productivity and economic growth in Pakistan: a policy perspective," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-18, December.
    7. Carolina Arteaga Cabrales, 2011. "Human Capital Externalities and Growth," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 29(66), pages 12-47, December.
    8. Sarath Delpachitra & Pham Van Dai, 2012. "The Determinants of TFP Growth in Middle Income Economies in ASEAN: Implication of Financial Crises," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 11(1), pages 63-88, June.
    9. Nikita Céspedes & Nelson Ramirez-Rondán, 2014. "Total Factor Productivity Estimation in Peru: Primal and Dual Approaches," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 37(73), pages 9-39.
    10. Chad Turner & Robert Tamura & Sean Mulholland, 2013. "How important are human capital, physical capital and total factor productivity for determining state economic growth in the United States, 1840–2000?," Journal of Economic Growth, Springer, vol. 18(4), pages 319-371, December.
    11. Glawe, Linda & Wagner, Helmut, 2020. "China in the middle-income trap?," China Economic Review, Elsevier, vol. 60(C).
    12. Pierre-Olivier Gourinchas & Olivier Jeanne, 2006. "The Elusive Gains from International Financial Integration," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(3), pages 715-741.
    13. Diego Restuccia, 2013. "The Latin American Development Problem: An Interpretation," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 69-108, January.
    14. Raphael Bergoeing & Raimundo Soto, 2005. "Testing Real Business Cycle Models in a Emerging Economy," Central Banking, Analysis, and Economic Policies Book Series, in: Rómulo A. Chumacero & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.),General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 7, pages 221-260, Central Bank of Chile.
    15. Luciano Fanti & Luca Gori, 2010. "Economic Growth and Welfare in a Neoclassical Overlapping Generations Growth Model with Minimum Wages and Consumption Taxes," LABOUR, CEIS, vol. 24(3), pages 238-262, September.
    16. Leal Ordóñez, Julio C., 2010. "Informal sector, productivity, and tax collection," MPRA Paper 26058, University Library of Munich, Germany, revised Oct 2010.
    17. Barry P. Bosworth & Susan M. Collins, 2003. "The Empirics of Growth: An Update," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2), pages 113-206.
    18. Ferreira, Pedro Cavalcanti & Pessôa, Samuel de Abreu & Veloso, Fernando A., 2014. "Distortions in the investment goods sector and productivity decline," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 755, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    19. Artelaris, Panagiotis & Arvanitidis, Paschalis & Petrakos, George, 2006. "Theoretical and Methodological Study on Dynamic Growth Regions and Factors Explaining their Growth Performance," Papers DYNREG02, Economic and Social Research Institute (ESRI).
    20. Norman Loayza & Pablo Fajnzylber & César Calderón, 2005. "Economic Growth in Latin America and the Caribbean : Stylized Facts, Explanations, and Forecasts," World Bank Publications - Books, The World Bank Group, number 7315.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2013/109. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.