TITLE:
The Relationship between Productivity and Inflation: An Empirical Analysis of the Brazilian Economy
AUTHORS:
Denise Piper, Fernando Ferrari-Filho, Marcos Tadeu Lélis
KEYWORDS:
Economic Development, Inflation Targeting Regime, Non-Monetary Controls, Productivity
JOURNAL NAME:
Theoretical Economics Letters,
Vol.10 No.3,
June
9,
2020
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.