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Development Economics and Structuralist Macroeconomics

Development Economics and Structuralist Macroeconomics

Essays in Honor of Lance Taylor

Edited by Amitava Krishna Dutt

Lance Taylor is widely considered to be one of the pre-eminent development economists in the world and is known for his work on development planning, macroeconomics of development, stabilization policy, and the global economy. He has also been the major force behind structuralist economics, which is seen by many to be a major alternative to orthodox development economics and policy prescriptions. The essays in this volume, written by well-known scholars in their own right, make contributions to each of these areas while honoring the contributions made by Lance Taylor.

Chapter 15: Micro-macro interactions, competitiveness and sustainability

José María Fanelli

Subjects: development studies, development economics, economics and finance, development economics

Extract

15. Micro–macro interactions, competitiveness and sustainability José María Fanelli1 INTRODUCTION The continuous implementation of market-oriented reforms and the increasing influence of globalization have been two salient characteristics of the 1990s in Latin America (LA). As a consequence, today, the structure of the LA economies presents substantial changes. They are considerably more open to international trade and capital flows, and domestic markets are much freer than in the post-war period. In this new scenario, key macroeconomic indicators such as the inflation rate showed an encouraging evolution while the growth prospects improved as compared to the debt-crisis period. In spite of this, however, the old challenge of achieving a sustained growth rate that could gradually close the income gap with developed countries appears to be no less difficult than in recent decades. There are two relevant obstacles that the market-oriented reforms have encountered. The first is that markets are underdeveloped in LA. There exist important failures in the factor, services and goods markets that tend to affect significantly the optimality of the market outcome. The second is that institutional development is weak and, thus, government interventions and regulations tend to be inefficient. The combination of these two factors represents a serious obstacle to the development of a denser market structure capable of exploiting the potential benefits of market liberalization. In a context of market failures and weak institutions, policymakers have a limited capacity to manage the complex interactions between productivity growth, macroeconomic stability...

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