Savings, Investment, Terms of Trade, and Sustainability of the Internal Approach: 1993 - 2019

Pablo Lorenzo Villacampa Portuguez
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Pablo Lorenzo Villacampa Portuguez: Pontificia Universidad Católica del Perú

Revista Economía, 2024, vol. 47, issue 93, 89-124

Abstract: Welfare measures and their assessment involve a set of indicators that, as economic thought evolves, are subject to critique. Nonetheless, the ultimate debate focuses on the quality of life and the conditions fostered by each economy. Using data from the period 1993 to 2019, this paper presents an analysis of the current account and terms of trade, highlighting the significance of these variables, as they encompass important flows and contribute to shaping market conditions and the resulting benefits. The study employs both Vector Error Correction (VECM) andStructural Vector Error Correction (SVECM) models to explore the interplay between external dynamics and their effects on the economy. The findings reveal that an export price shock has an expansive effect on investment, yet its impact on savings becomes marginally significant over time.Unexpected shocks on investment are roughly 38% reliant on external factors, of which an average of 32% is attributable to export prices, underscoring the tight correlation between investment and international market dynamics. Notably, the results indicate that external dynamics primarily exert short-term effects. Consequently, despite periods of robust growth, reduced unemployment, and poverty reduction, these indicators have not proven to be sustainable in Peru.

Keywords: Terms of Trade; Current Account; Unit Root; Cointegration; Poverty; Time Series (search for similar items in EconPapers)
JEL-codes: C32 E32 F32 F41 (search for similar items in EconPapers)
Date: 2024
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