CEPAL Magazine presents studies on the effects of uncertainty on economic growth, commodity prices and the middle-income trap in Latin America and the Caribbean

Uncertainty maintains a direct correlation with inflation and with the volatility of three macroeconomic variables: the inflation rate, the gross domestic product (GDP) and the real exchange rate of the economies. This is supported by research published in the most recent issue of CEPAL Magazinemain academic publication of the Economic Commission for Latin America and the Caribbean.

Its edition N⁰ 137 (August 2022) is now available on the internet with various analyzes by leading international specialists, where the prices of basic products and their effects on the movement of capital in emerging economies are also studied, and innovation through level of companies as a key factor to increase productivity -essential to escape the trap of average income that affects many countries in the region- among other issues.

In the article entitled “Uncertainty and economic growth: lessons from Latin America”, Daniel Aromí, Professor at the Faculty of Economic Sciences of the University of Buenos Aires (Argentina) and the Faculty of Economic Sciences of the Pontifical Catholic University of Argentina, together with Professors from the Department of Economics at the Universidad Nacional del Sur (Argentina), Cecilia Bermúdez and Carlos Dabús, explore the effect of uncertainty on economic growth in Latin America between 1960 and 2016, a period defined by stages of social unrest and by a high political and economic instability.

Along with considering that uncertainty maintains a correlation with inflation and with the volatility of three macroeconomic variables: inflation rate, GDP and real exchange rate, the authors point out that the empirical evidence indicates that uncertainty is detrimental to growth, in especially when it reaches high levels. They add that higher inflation and volatility in output and inflation promote an atmosphere of uncertainty that discourages long-term productive investment and reduces economic growth. They conclude that policymakers in the region could reduce instability and improve economic performance by adopting stronger countercyclical policies to further stabilize prices and output fluctuations.

For their part, in the article “The prices of basic products and the phenomena of capital movement in emerging economies”, researchers from the Department of Rural Economy (DER) and the Department of Economics (DEE) of the Federal University of Viçosa (Brazil), Eliene de Sá Farias, Leonardo Bornacki de Mattos, and Fabrício de Assis Campos Vieira, analyze the relationship between commodity prices and some observed phenomena in capital movements in a group of selected emerging economies.

Their results show that emerging economies suffer a greater number of episodes of phenomena that reduce capital inflows or outflows compared to developed economies. These economies are more likely to present a reduction in financing, depreciation of the current account of the balance of payments and negative impacts on their growth. The analysis carried out for all the countries in the sample (15 in total) allows us to conclude that there is indeed a relationship between the price of basic products and the episodes of the phenomena related to the movement of capital by residents. The results also show that this relationship becomes significant for the capital of non-residents when the study focuses on countries with large export volumes of basic products, such as soybeans, minerals and oil.

Meanwhile, in the article “Innovation at the level of companies, government policies and the middle income trap: lessons from five Latin American economies”, the economics professors at Mount Holyoke University (United States), Eva Paus and Michael Robinson, they argue that fostering innovation and ensuring it is broad-based is critical to escaping the middle-income trap. Promoting it at the national level is a complex and multidimensional process, in which companies play an essential role.

The authors indicate that the empirical conclusions of their study support the application of active public policies to foster innovation in Latin America. In the first place, the results show that policies related to innovation and competitiveness are interrelated. They explain that the characteristics that make firms more likely to use inputs for innovation are exports, the use of virtual connections to interact with customers, and obtaining internationally recognized certifications in production standards. Hence, providing companies with a quality broadband infrastructure that allows them to access the Internet and supporting them to obtain these international certifications is important to increase their competitiveness and improve the chances that they will participate in innovation activities.

In this new edition, CEPAL Magazine It includes a total of 10 articles by renowned international experts and professors, who analyze various topics related to the economic and social situation of a series of Latin American countries. In addition to the studies already mentioned, research on economic complexity and human development is also published; the systemic nature of technological development; the production and profitability of the agricultural sector in Ecuador; inequalities in participation in the digital society in Brazil and Chile; and an analysis of the Argentine automotive chain from the convertibility crisis, among other topics.

Readers are reminded that the opinions expressed in the articles published in the Review are those of the authors and do not necessarily reflect the views of ECLAC.