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

Danilo Spinola

#2020-002

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

  


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