Essays in Honor of Lance Taylor
Edited by Amitava Krishna Dutt
Chapter 15: Micro-macro interactions, competitiveness and sustainability
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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