MEASURING ARGENTINA’S GDP GROWTH Just Stilysed Facts MEASURING ARGENTINA’S GDP GROWTH Just Stilysed Facts Ariel Coremberg-ARKLEMS+LAND-UBA 1 st draft working paper This paper has been written as a tribute to Alberto Fracchia, recently died, a historic and well recognized expert on national accounts and statistics of Argentina and Latin America. He was the founder of the National Accounts Bureau in Argentina, and expert of several Latin American countries. He transmitted me the “love” for numbers and economic series. After 2007, His pupils had to follow their careers outside the official institutions of Argentina or in other countries. 1

“There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen." Frederic Bastiat "There is no science without measurement, no quality without testing, and no global markets without standards." (Commission of the European Union) 2

OBJETIVO PROYECTO ARKLEMS+LAND UBA Contraparte Argentina Academica Proyecto KLEMS coordinado desde U Harvard- Groningen Medicion Fuentes del Crecimiento, Productividad y Competitividad: Servicios de Capital: TIC´s,, Infraestuctura, Capital Humano, Factor Trabajo – Argentina: +RN: Tierra y Activos Subsuelo 3

Equipo de Trabajo ARKLEMS UBA Ariel Coremberg Marisa Wierny Hernan Muñoz Luciano Tigani Milagros Gimenez Santiago Camara Gaston Lopez 4

5 Koopmans (1947): “Evade Measurement without theory” Hulten (1990): “but no theory without measurement”! Measurement with theory as opposed measurement without theory and theory without Measurement (Barnett, Diewert, Zellner) J. Hicks (1981)“ The measurement of capital is one of the nastiest jobs that economists have set to statisticians” "Not everything that can be counted counts, and not everything that counts can be counted." (Albert Einstein)

OBJETIVE Measuring Argentina GDP Growth Measuring Argentina GDP Growth analyze and discuss methodologies and numbers We don‘t pretend judge: composition and sustainability of macroregimes in terms of other important variables: welfare, income distribution, employment, fiscal or competitiveness We don‘t pretend judge: composition and sustainability of macroregimes in terms of other important variables: welfare, income distribution, employment, fiscal or competitiveness 6

OBJETIVE We don’t measure the GDP we like: joint output in agric.; productivity in services or quality change in outputWe don’t measure the GDP we like: joint output in agric.; productivity in services or quality change in output Just Stylized Facts about Argentina GDP GROWTH trying to Reproduce GDP as traditional National Accounts Methodology Just Stylized Facts about Argentina GDP GROWTH trying to Reproduce GDP as traditional National Accounts Methodology

Main Methodological Points Revision of Quarterly GDP activity level from supply side (also demand side) base year 1993 to review growth: period by data published today from similar sources and series as cited in: Methodology see SNA Argentina (1999) This is not change base year, or GDP at current prices (or GDP per capita u$s) 8

No es objetivo original del Proyecto ARKLEMS medir actividad económica mas allá que el modulo 1 KLEMS implica la revisión de la medición del output ajustada por cuestiones adicionales (tornquist, prod. en servicios, p. básicos, etc.) No es objetivo original del Proyecto ARKLEMS medir actividad económica mas allá que el modulo 1 KLEMS implica la revisión de la medición del output ajustada por cuestiones adicionales (tornquist, prod. en servicios, p. básicos, etc.) Pero es imprescindible revisión ante crisis estadística para medir correctamente productividad Pero es imprescindible revisión ante crisis estadística para medir correctamente productividad Nada sustituye el Resultado del Trabajo de una Oficina de Estadísticas Creíbles y Consistentes, con Capital Humano formado y acumulado en décadas Nada sustituye el Resultado del Trabajo de una Oficina de Estadísticas Creíbles y Consistentes, con Capital Humano formado y acumulado en décadas 9

STRUCTURE OF PAPER LEMMAS AND CONTEXT BACKGROUND AND FRAMEWORK OF HISTORICAL NATIONAL ACCOUNTS OF ARGENTINA AND LAC MAIN RESULTS: LEVEL GAPS AND GROWTH GAPS: AGGREGATE AND BY INDUSTRY MYTHS, LEGENDS AND TYRANNY OF NUMBERS –METHODOLOGICAL MYTH –GROWTH ACCELERATION MYTH –SUSTAINABLE GROWTH MYTH –CHAMPIONSHIP OF LATINAMERICA MYTH 10

11 EQUIPONDERACION: –CONSISTENCIA MODELOS PARA ANALISIS ECONOMICO (Canavese) –CALIDAD Y CONSISTENCIA DATOS QUE LO VALIDAN (Fracchia) EL PIB NO ES UNA ESTADISTICA. ES EL AGREGADOR CONSISTENTE DE LOS DATOS O SERIES QUE LO VALIDAN SISTEMA DE CUENTAS NACIONALES (2008) PARA MEDIR LOS PRINCIPALES VARIABLES Y AGREGADOS ECONOMICOS EL PIB ES LA PIEDRA FUNDAMENTAL DE LA MEDICION Y ANALISIS NO SOLO DEL CRECIMIENTO ECONOMICO SINO TAMBIEN DEL BIENESTAR

CONCLUSIONES Policy makers usually questioned official figures of Inflation, Growth and Welfare during Recessions or Crises In Countries with Institutional and Congress and cross public opinion controls, policy makers (president but also congress) responses with creation of more research, more indexes, more statistics and academics reports pushing the limit of measurement 12

13 GDP AND BEYOND: Policy makers questioned contra cyclical Official Statistics during Bad years GDP doesn´t include all welfare concepts (health, education and quality outcome, human capital, culture, time use, household and other non-market activities, also inflation measured is different to inflationary perceptions of average households R. Kennedy (1968), Pension Funds crises (1985), Clinton (1990’s), Sarkosy (2008), Obama (2009) Responses of Policy Makers in Democracy: –Amplify the frontier of measurement. More CPI, WPI and U indexes in USA. Changing of Law of Pension Funds –Boskin report –Stiglitz-Sen-Fitoussi Report. –Subjetive Well-being of Nations (2007) NTA vs NIA: A.B. Krueger, Daniel Kahneman, David Schkade –NEVER MANIPULATION ON EXISTING ECONOMIC SERIES AND STATISTICS

CONCLUSIONES Confronting Inflation in Argentina Instead of change the political economy or swap the bonds with another clauses, Argentina open the Pandora box of manipulation and Also Non-schumpeterian Destruction of Statistical System. Why alternative CPI and GDP could exists: because Argentina was the historical leader of the region in statistics. Argentine official GDP could not evade the so-called “Pandora Box” effects, caused by the political intervention of official statistics 14

ASPECTOS METODOLOGICOS 15

ANTECEDENTES Y EXPERIENCIA ACUMULADA Argentina y America Latina 16

Table A1: Main Background of National Accounts in Argentina Date of publication Title InstitutionBase Year Period 1946 National Income of Argentina NAB-Central Bank GDP and Income of Argentina Secretariat of Economic Issues The Economic Development of Argentina ECLAC GDP of Argentina NAB-Central Bank Income distribution and National Accounts of Argentina CONADE-CEPAL (ECLAC) GDP origin and National Expenditure Composition NAB-Central Bank GDP origin and National Expenditure Composition NAB-Central Bank System of National Accounts and Income of Argentina NAB-Central Bank Quarterly estimations of supply and Demand NAB-Central Bank Revision of National Accounts and Income Distribution of Argentina ECLAC -PNUDBIRF Revision of Quarterly estimations of supply and Demand NAB-Ministry of Economy System of National Accounts, Base year 1993 NAB-Ministry of Economy Updated of supply and demand NAB-Ministry of Economy Input Output Matrix 1997 NAB-Ministry of Economy- INDEC

BACKGROUND AND FRAMEWORK OF HISTORICAL NATIONAL ACCOUNTS OF ARGENTINA AND LAC 18

BACKGROUND ARGENTINA IN SYNTHESIS: INFLATION PROBLEM Ar: response NON- SCHUMPETERIAN DESTRUCTION OF NATIONAL SYSTEM OF STATISTICS See UBA Report, and ANCE report (2009) PANDORA BOX EFFECTS IN ALL COMPONENTS OF ECONOMIC AND SOCIAL SERIES AND STATISTICS FAR FROM SNA RECOMENDATIONS FAR FROM AVERAGE EXPERIENCE OF LATINOAMERICAN COUNTRIES 19

20 OLD METHODS (FIX LASPEYRES INDEX) OLD BASE YEAR 2004 ECONOMIC CENSUS OLD CAPTURE OF SUBTERRANEAN, INFORMAL AND BLACK ECONOMY OLD BUT NEITHER OF THIS PROBLEMS IS KEY IN ORDER TO MEASURE PRESENT GDP DEBATE, NO CPI MANIPULATIOM (ONLY SMALL SHARE) Analogy with CPI banal debate: inflation measurement problem is not related with plutocratic effects, weights, biased avergare level prices comes from different zones (urban vs rural, middle class neighborhood vs poor zones) or commercial type (“supermarkets vs chinostores”. Are the prices supposely surveyed. GARBAGGE IN, GARBAGGE OUTGARBAGGE IN, GARBAGGE OUT

Main Methodological Points Traditional approach of quarterly GDP estimation from supply side in Argentina –Exhaustiveness, representativeness and Consistent Criteria: capture the output volume by representative indicators –Not all Surveys have enough representation of the global output by industry –V.I. obtained through Deflated Values from Surveys could be distorted under High Inflation 21

Main Methodological Points Most of Sectors ‘ve been traditionally measured through representative volume index indicators (chambers, official institutions), –avoiding non-representativeness of surveys and high inflation distortion problem Only Financial Intermediation depends on CPI deflator 22

Main Methodological Points Commodity Flow: Trade, Cargo Transport through IO coef. by industry Intermediate input demand: f.ex. wearing apparel; dressing Demand functions in some services: restaurants, non-regular passengers transport (from 2002 only income elasticity) Non-Market services by employment indicators: education, health, public administration, other services 23

Main Methodological Points Try to reproduce GDP volume index at 93 prices as SNA Ar, not the desire GDP: vrg. ex. Productivity of services or quality changes of outputs Taking into account these traditional methodology and similar data sources as SNA Ar (1999) with published series today at very high detail level (4-5 ISIC digit rev.3) from 1993 to test the reproduction and correlation of Activity Level with official figures without any econometric imputation 24

PRINCIPALES RESULTADOS 25

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: 15,9% vs 29,4% 27

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29

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MYTH 1: LEVEL GAP DUE TO CPI. NO! Industry Contribution to Argentina GDP gap (ratio between Official GDP and ARKLEMS reproducible GDP 2012 level -total GDP Gap level=100% (12.2%). 31

FACTS: WRONG!.FACTS: WRONG!. INDUSTRY CONTRIBUTION TO LEVEL GAP BY SECTOR POINT THAT THERE IS ABANDONMENT OF TRADITIONAL METHOD AND SOURCES of GDP growth (SNAar (1999)) base 93 INDUSTRY CONTRIBUTION TO LEVEL GAP BY SECTOR POINT THAT THERE IS ABANDONMENT OF TRADITIONAL METHOD AND SOURCES of GDP growth (SNAar (1999)) base 93 MYTH 1: LEVEL GAP DUE TO CPI: NO!!!!! 32

33 The main difference is due to having withdrawn the traditional methodology that National Accounts of Argentina (Nar) for Quaterly GDP activity level 1993 base year (SNAar1999).The main difference is due to having withdrawn the traditional methodology that National Accounts of Argentina (Nar) for Quaterly GDP activity level 1993 base year (SNAar1999). A Great Part Of Methodology and Sources of Traditional Nar are VOLUME INDICATORS that could obtain because are published and comes from several institutions and chambers (See SNAar99)A Great Part Of Methodology and Sources of Traditional Nar are VOLUME INDICATORS that could obtain because are published and comes from several institutions and chambers (See SNAar99)

MYTH 2: growth acceleration but Crecimiento Ma Non Troppo Recuperacion-Crecimiento-Desarrollo Recovery: NBER (Burns-Mitchell-Heymann- Coremberg) Growth Acceleration (Hausmann-Rodrik- Prichett-Rostow) Crecimiento Continuo y Sostenido: Entre Max Ciclicos e intensivo en Productividad 34

MYTH 2: GROWTH ACCELERATION-CHINESE RATES Per Capita growth: g g t+n >3.5 ppa →Growth is rapid  g t+n >2.0 ppa →Growth accelerates y t+n > max(y i ), i≤t →Post growth output exceeds pre episode peak Relevant time horizon is eight years (i.e., n = 7) 35

MYTH 2: GROWTH ACCELERATION-CHINESE RATES Table 1: Argentina GDP growth prices- ARKLEMSOFFICIAL Accumulated Growth 56,3% Annual Growth 5,7% Accumulated Growth 71,1%91,9% Annual Growth 5,6%6,7% Accumulated Growth 47,6%48,3% Annual Growth 8,1%8,2% Accumulated Growth 15,9%29,4% Annual Growth 3,0%5,3% Accumulated Growth 42,2%59,4% Annual Growth 2,5%3.4% 36

MYTH 2: GROWTH ACCELERATION- CHINESE RATES Table 2: Argentina GDP per capita growth prices- g  g (with ) ARKLEMSOFFICIALARKLEMSOFFICIAL Accumulated Growth 43,7% Annual Growth 4,2% Accumulated Growth 48,3%66,6%-0,2%1,0% Annual Growth4,0%5,2% Accumulated Growth 37,7%38,3% Annual Growth6,6%6,7%2,4%2,5% Accumulated Growth 7,7%20,4% Annual Growth1,5%3,8%-2,7%-0,5% Accumulated Growth 15,6%29,9% Annual Growth1,0%1,8% 37

MYTH 2: GROWTH ACCELERATION- CHINESE RATES FACTS: NO SUSTAINABLE GROWTH ACCELERATIONFACTS: NO SUSTAINABLE GROWTH ACCELERATION Because Not Clauses H-R-P: 1, 2 And 4.Because Not Clauses H-R-P: 1, 2 And 4. g annual:  g annual: 

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Inestabilidad 98 Ministros de Economía 58 Presidentes del BCRA 48 Presidentes 40

Creación y Destrucción de Capital Humano Masificación Educación Primaria Ley 1420: Educación Laica, Gratuita y Obligatoria Reforma Universitaria 1918 (FUA): autonomia universitaria, ingreso irrestricto, concursos pdocentes, cogobierno, centro de estudiantes 41

5 Premios Nobel: Saavedra Lamas (1937): Paz (Guerra Bolivia-Paraguay, Pacto Antibelico Saavedra Bernardo Houssay (1947): Fisiologia y Medicina (las hormonas pituitarias en la regulación de la cantidad de azúcar en sangre) L.F. Leloir (1970): Química (los nucleótidos de azúcar y el rol que cumplen en la fabricación de los hidratos de carbono) A.P.Ezquivel (1980): Paz. SERPAJ-defensa de los Derechos Humanos en Iberoamérica Cesar Milstein (1990): Medicina (rol anticuerpos y su rol para el tratamiento cancer y otras enfermedades) 42

Objetivo Mantener 6% PBI Gasto Educativo Resurrección de la Educación Técnica y Carreras Ingenieriles en f. demanda por mayor sustitucion importaciones PERO Caída en la Calidad Educativa (PISA) Contradicciones Planes Fines II Continuos Problema de Implementación de la Política Educativa Caida en los salarios reales de los docentes Destrucción INDEC 43

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Fuente: ARKLEMS 45

Fuente: ARKLEMS 46

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MYTH 3 BEST GROWTH PATTERN OF ARGENTINA HISTORY STRUCTURAL CHANGE GROWTH PATTERN (MACRO NUMBER) 48

ILUSION DURANTE Y DESENCANTO EX-POST DE LA SOCIEDAD ARGENTINA CON LOS PERIODOS DE CRECIMIENTO ECONOMICO ILUSION DURANTE Y DESENCANTO EX-POST DE LA SOCIEDAD ARGENTINA CON LOS PERIODOS DE CRECIMIENTO ECONOMICO OBJETIVO: Obtener una serie única de Crecimiento PBI que permita analizar los diversos Reg. Macroeconomicos. No se pretende juzgar la composición y sostenibilidad de los reg macro y su crecimiento en términos de Competitividad y Sostenibilidad Social 49

Discrepancias por re- estimaciones Las revisiones de procedimientos de estimación y la utilización de información censal implicaron revisiones en la medición del producto a precios corrientes. Criterio: mantener estimaciones de años base; suponer que discrepancia distribuida uniformemente y se produce por diferencias y problemas en los deflactores (sobre todo en perídodos de alta inflación) De hecho implica Ajuste por Economia No Observada (solo a partir de base 1986 y en b.1993) y problemas de subcaptacion via Censos en años intermedios

Discrepancias por re- estimaciones Respetar ivf por sector de las series años base mas prox al año medición Bases fijas Congela estructura precios relativos en períodos intermedios. Distorsiona las contribuciones sectoriales al GDP

Discrepancias por re- estimaciones Encadenados-Base Móvil: Tornquist, Fisher (superlativos), Encadenados Laspeyres Índices de Volumen Físico Tornquist, base móvil

MYTH 3: STRUCTURAL CHANGE GROWTH PATTERN: (MACRO NUMBER) and Best Growth Pattern of Argentina during last 100 years 53

MYTH 3: STRUCTURAL CHANGE GROWTH PATTERN: (MACRO NUMBER) and Best Growth Pattern of Argentina during last 100 years SeriePeriodGDPPop. GDP per capitaYearsfinalMultiply ARKLEMS at 1993 prices ,5%1,5%1,0% , ARKLEMS Tornquist ,2%1,5%0,7% , ARKLEMS Tornquist ,1%1,5%1,6% , ARKLEMS Tornquist ,7%1,5%1,2% , Official at 1993 prices ,4%1,5%1,9% , Official at 1993 prices ,6%1,5%4,1% , Official at 1993 prices ,1%1,5%6,6% ,1

55

56

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58

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(draft) GDP (2.5%, 1,5% per capita) K (2.7% anual; 2.6% equipo durable), L (1.6%) “PTF” (0.3%) (WITHOUT HK, Kservices, utiliz. Adj) : 1,0% (USA 2% with adj. So no gap shrinks) (-0,6%) X: 4.6%. MYTH 3: NO STRUCUCTURAL CHANGE GROWTH PATTERN: TFP SLOWDOWN

Source: ARKLEMS and ECLAC MYTH 4: ARGENTINA WAS THE GROWTH CHAMPIONSHIP OF THE REGION: NO! Figure 4: Latin America GDP Growth, (compound rate, %) 62

MYTH 4: ARGENTINA WAS THE GROWTH CHAMPIONSHIP OF THE REGION: NO! 63

MYTH 4: ARGENTINA WAS THE GROWTH CHAMPIONSHIP OF THE REGION: NO! Figure 5: Latin America GDP Growth, (compound rate, %) 64

MYTH 4: ARGENTINA WAS THE GROWTH CHAMPIONSHIP OF THE REGION 65

CONCLUSIONES 66

CONCLUSIONES ARKLEMS reproducible showed a slower growth than official series. But contrary to several myths, the gap is not related with deflation with distort prices index, directly linked with the abandon of traditional methodology followed by argentinean national accounts. 67

CONCLUSIONES Main +bias are not based by distorted CPI but mainly upon the abandonment of traditional methodology and sources followed ex Level gap 12,4%. Mainly on services (74% of the total), Manufacturing (20%). Only 27,9% are due to cpi (financial intermediation Differences are not systemathic. Adjusted Public Administration have a high dynamism, no systematic differences in agricultural sector except during Important differences in gdp growth during non recognized reccesions years (2009: severe draft on A, H1N1, effect on H and other services, International Crises effects on manufacturing exports. 2012: passengers transport begins to decline. Manufacturing, Trade, Cargo transport as usual. Value Added Growth by industry Differences are important, not only financial but also, trade, manufacturing and others 68

CONCLUSIONES Only chinese rates until 2007 Normal Recovery: : 5,5%, : 5,8%, : 5,1% Non sustainable per capita growth acceleration H-R-P-Rostow methodology No structural change on Macroeconomic GDP growth Pattern: 2,4% below ,1% trend NBER 69

CONCLUSIONES The paper showed that while Argentina growth was important during recent growth episode, similar to period ; and it was not the growth championship of Latin America. 70

CONCLUSIONES Long run growth: : 2,4% Argentina grew less than Brazil and LAC. Little bit less than Historical Trend: : 2,8% 71

CONCLUSIONES Importancia no solo del Crecimiento Sostenido, sino de otro concepto olvidado: Crecimiento Continuado –Baja Volatilidad 72

CONCLUSIONES Why alternative CPI and GDP could exists: because Argentina was the historical leader of the region in statistics. Argentine official GDP could not evade the so-called “Pandora Box” effects, caused by the political intervention of official statistics 73

Cien Años en Búsqueda de una Tendencia Sostenible Sostener la Competitividad, los salarios, la inserción flexible en el comercio internacional e incrementar el valor agregado y diversif. de nuestras exportaciones y la amortiguación a los shocks externos Persistencia Incertidumbre Estratégica y dificultad en mecanismos institucionales que permitan mediar en los conflictos distributivos sobre apropiación de la renta Importancia no solo del Crecimiento Sostenido, sino de otro concepto olvidado: Crecimiento Continuado –Baja Volatilidad 74

MUCHAS GRACIAS 75