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The Relationship between Productivity and Inflation: An Empirical Analysis of the Brazilian Economy
Economics at Universidade Franciscana, Santa Maria, Brazil
Economics at Unifersidade Federal do Rio Grande do Sul, Porto Alegre, Brazil
Researcher at CNPq, Brasília, Brazil
Economics at Unisinos, Sao Leopoldo, Brazil
- 1 Economics at Universidade Franciscana, Santa Maria, Brazil
- 2 Economics at Unifersidade Federal do Rio Grande do Sul, Porto Alegre, Brazil
- 3 Researcher at CNPq, Brasília, Brazil
- 4 Economics at Unisinos, Sao Leopoldo, Brazil
Theoretical Economics Letters·Volume 10 (2020)·Pages 563–578·Published 20 May 2020·DOI10.4236/tel.2020.103036
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Abstract
The article presents an empirical test of the hypothesis that productivity expansions are the answer to the inflation problems experienced by the Brazilian economy. The study obtained evidence from the estimation of a Structural Autoregressive Vector (SVAR) model for the period after December 2009, which confirmed the existence of an inverse relationship between inflation and productivity in Brazil’s manufacturing industry. However, this relationship is inelastic; that is, Brazilian entrepreneurs tend to convert productivity gains into mark-up instead of passing them on to prices. Thus, productivity increases yield smaller inflation control effects than expected.
KeywordsEconomic DevelopmentInflation Targeting RegimeNon-Monetary ControlsProductivity
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