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Productive development, structural change and international capital flows: The role of macroprudential policy for transformative post-Covid recovery

Productive development, structural change and international capital flows: The role of macroprudential policy for transformative post-Covid recovery

Botta, Alberto ORCID: 0000-0001-9464-8251, Yajima, Giuliano and Porcile, Gabriel (2021) Productive development, structural change and international capital flows: The role of macroprudential policy for transformative post-Covid recovery. Project Report. UN Commission for Latin America and the Caribbean (ECLAC).

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Abstract

In this report, we stress the importance of structural change and productive development as leading engines of post-Covid economic recovery. We do so by first putting emphasis on the perverse relation between underdeveloped productive structures and the intensity of the Covid-19 crisis. We then look at factors that may have harmed productive development in emerging and developing (EDE) countries over the last forty years. We investigate the role of (non-FDI) net capital inflows as potential source of premature de- industrialization in a wide range of EDE countries, Latin American ones in particular, in the context of increasing financial integration. Our analysis intends to verify whether periods of abundant capital inflows to EDE economies may have fed perverse structural changes away from those sectors, namely manufacturing, traditionally recognized as prime sources of long-run development. We consider a sample of 36 countries from 1980 to 2017. We find that manufacturing employment and GDP shares tend to contract more substantially and the economic complexity index decreases during episodes of financial bonanza. Given this evidence, we discuss policies that may support transformative post-Covid recovery. We first consider available space for expansionary fiscal policy and public investment-centered recovery plans as influenced by the degree of financial integration characterizing EDE countries. We then analyze whether macroprudential policies taming international capital mobility may bear positive effects for long-run productive development on top of their implications for (short-term) financial and macroeconomic stability.

Item Type: Monograph (Project Report)
Uncontrolled Keywords: Covid-19, Structural Change, Capital Inflows, Macroprudential Policies
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
H Social Sciences > HJ Public Finance
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA)
Last Modified: 02 Sep 2021 10:22
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
Selected for REF2021: None
URI: http://gala.gre.ac.uk/id/eprint/33729

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