The La Marca Model revisited: Structuralist Goodwin cycles with evolutionary supply side and balance of payments constraints

This research investigates the causes of endogenous volatility in Latin America by expanding the La Marca (2010) model. The expansion consists in study: (I) Price-neutrality, (II) stability of the external sector, and (III) fixed income distribution. We also add (IV) an evolutionary supply-side in which productivity is at the centre of the economic dynamic through international technology transfer and the Kaldor-Verdoorn effect. The results show that (1) Latin American parameter values increase the endogenous oscillatory adjustment. (2) In all cases the model converges. (3) The price-neutrality assumption and external sector stability depend on specific parameter values to show either a cyclical or a monotonic convergence pattern. (4) Fixed income distribution lead to a monotonic trajectory, reducing oscillations. (5) The inclusion of the productivity dynamics generates new sources of volatility in the relationship between productivity, capacity utilization, and net external assets.

Keywords: Economic Cycles, Structuralism, Macroeconomic Dynamics.

JEL Classification: E32, F44, O11, O30