NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Marek Kapička

CERGE-EI, a joint workplace of Charles University
and the Economics Institute of
the Czech Academy of Sciences
Politických vězňů 7
111 21 Prague
Czech Republic

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: CERGE-EI

NBER Working Papers and Publications

October 2019Exploring The Role of Limited Commitment Constraints in Argentina’s "Missing Capital"
with Finn Kydland, Carlos Zarazaga: w26359
We study why capital accumulation in Argentina was slow in the 1990s and 2000s, despite high productivity growth and low international interest rates. We show that limited commitment constraints introduce two mechanisms. First, the response of investment to a total factor productivity increase is muted and short-lived, while the response to a decrease is large and persistent. Second, unlike in a first-best economy, low international interest rates may reduce capital accumulation, because they increase the relevance of future commitment constraints. A quantitative implementation of the model economy shows that the two mechanisms are quantitatively important for the dynamics of Argentina’s capital accumulation. The model accounts for between 50% and 85% of the capital missing from Argentina ...
 
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