{"id":3543,"date":"2019-09-13T15:04:50","date_gmt":"2019-09-13T13:04:50","guid":{"rendered":"https:\/\/blog.cerge-ei.cz\/?p=3543"},"modified":"2019-10-08T16:36:28","modified_gmt":"2019-10-08T14:36:28","slug":"top-trio-help-explain-argentinas-problems","status":"publish","type":"post","link":"https:\/\/blog.cerge-ei.cz\/?p=3543","title":{"rendered":"Top Trio Helps to Explain Argentina\u2019s Problems"},"content":{"rendered":"

In August, Carlos Zarazaga<\/a> (Federal Reserve Bank of Dallas) and Nobel Laureate Finn Kydland<\/a> (UC Santa Barbara) came to CERGE-EI to meet with our Faculty member Marek Kapi\u010dka<\/a> and finish their paper on Argentina\u2019s \u201cMissing Capital Puzzle\u201d. While being interviewed about their research, Carlos called Marek and Finn the best team of people he had ever worked with. It is not hard to believe what he said, as the three colleagues were finishing each other\u2019s sentences and joking throughout almost the whole interview.<\/p>\n

Trying to remember when their joint work started was not an easy job for the trio: “I don\u00b4t know where to start. I was Faculty at Santa Barbara, Finn was at Santa Barbara and Carlos had visited. It\u2019s a long time ago,\u201d Marek recalled. \u201cWas it 2011? Or maybe 2009,\u201d Carlos stepped in. \u201cAnd Carlos and Finn had been working on related issues. They had a paper in The Review of Economic Dynamics on the lost decade in Argentina. Maybe Carlos could say more about it,\u201d Marek continued.<\/p>\n

Carlos then explained how in early 2000 there was a broader project focusing on economic depression and he was asked to join as Argentina was among the countries that were included in the study. That was when his collaboration with Finn Kydland started. \u201cIn our paper, it was very clear that despite favorable conditions both on the international market and the domestic market, Argentina was not investing as much as it should. I have some charts and you can see that the model we had predicted on the capital stock should work like this (shows the curve) and it was almost flat. So, we conjectured that it was because of the lack of credibility problem. But of course it was just a conjecture and we wanted to formally prove it,\u201d explained Carlos.<\/p>\n

\"\"<\/p>\n

It was a couple of years later when they all met at UC Santa Barbara. \u201cWe worked with Finn and agreed on finally going to the next stage of the project and showing formally the lack of credibility which involves basically a model where we have imposed certain equations,\u201d continued Carlos. \u201cSo, basically we are talking about modeling that, and that is when Marek got involved,\u201d he said.<\/p>\n

It took a while before the first results came in as all three were busy with other projects. \u201cWe had very preliminary findings, well, not even findings, but calculations, like two years ago,\u201d Marek noted. \u201cAnd finally we decided it\u2019s taking too long, we have to finish this project, so Marek came to Dallas in May,\u201d Carlos continued. \u201cIt was three trips, first Santa Barbara, then we were in Dallas and now here,\u201d Finn finished.<\/p>\n

Asked if the meeting in Prague might be the final one for this paper Marek seemed optimistic. \u201cI think we\u2019ll finish it and send it to the journal in fall. Maybe in a couple of weeks,\u201d he said. Carlos agreed with a nod, noting that the deadline for submitting the paper is approaching. \u201cOr a couple of months,\u201d laughed Finn as the most experienced of the three researchers.<\/p>\n

Chasing deadlines is not the only struggle while working on a paper. \u201cThe problem is that the data for Argentina we need are not reliable,\u201d Carlos explained. \u201cYou go to the national statistics office and they tell you: don\u2019t trust the data between 2008 and 2014,\u201d he continued. \u201cI remember that we needed some data that were not available, so you went to this person who told you to go to some other guy,\u201d noted Finn. Surprisingly, working with a Nobel Laureate does not circumnavigate such difficulties. \u201cNah, it doesn\u2019t help. It\u2019s more about who I know,\u201d said Carlos with laughter.<\/p>\n

\u201cFor me, it\u2019s a kind of optimistic project, you know, because in the Czech Republic, we always complain how bad things are,\u201d noted Marek and Finn started to chuckle. \u201cBut then I look at Argentina and I see, you know, we\u2019re not that bad,\u201d Marek continued.<\/p>\n

\"\"<\/p>\n

\u201cWell, what\u2019s the GDP per capita in the Czech Republic?\u201d Finn was wondering. Asked about the importance of this indicator when thinking about a certain country, Finn admitted there are other things to observe. \u201cWell, it\u2019s not crucial, but it is some indication. But of course, we know there\u2019s more to welfare than GDP or national income. For example, in countries such as Spain, people have way more fun than is indicated by their GDP,\u201d he explained.\u00a0 \u201cAnd so do the Czechs,\u201d noted Carlos pointing at the glass of beer in front of Finn and all three laughed again. \u201cWell, Spain is my favorite country in the world, so it would be hard to beat Spain, but you are right underneath,\u201d Finn reacted.<\/p>\n

But jokes apart \u2013 they have all agreed that missing data is a tricky problem to solve. \u201cThis is my data, so it\u2019s a question of how much will people be willing to believe what we constructed. So the important part of our project is checking whether we found some papers with the data we are using, that are telling the same story,\u201d described Carlos. \u201cAnd the story is that Argentina is in big trouble right now,\u201d he concluded.<\/p>\n

Together with Finn they explained how the decades of the constant undermining of credibility has had an impact on the whole of society. \u201cOnce you lose credibility, in order to regain it, you have to go for a long period of being well behaved and that is very hard to do. It\u2019s very hard to convince people to go through ten years of pain in order to have a better future for their children,\u201d said Carlos comparing the situation in Argentina to countries like Afghanistan and Somalia.<\/p>\n

The aim of the paper is not to offer a solution. \u201cIt\u2019s more like pointing out very clearly what went wrong, highlighting the mechanisms,\u201d Marek described. Carlos continued on a serious note with rather pessimistic predictions for his country, highlighting that almost one-fifth of children do not finish high school.<\/p>\n

The reaction from Marek involved joking again. \u201cIt always surprises me because Argentina has so many good economists.\u201d \u201cYes, that is amazing, \u201d Finn confirmed thoughtfully. \u201cBut they\u2019re all abroad,\u201d replied Carlos with laughter.\u00a0 \u201cI\u2019m pessimistic because I\u2019m kind of seeing Argentina going down, down, down. But I\u2019m not that pessimistic to the point that I do not want to write that paper,\u201d he added shortly after being called the most pessimistic person by Finn.<\/p>\n

Good vibes among the three researchers are obvious as they all reported having no serious arguments while working together. \u201cMaybe we\u2019ll get emotional once we get the referee report,\u201d noted Marek. \u201cSeriously, it is nice with Marek and Finn. It\u2019s the best team of people I have ever worked with,\u201d was Carlos\u2019 closing note.<\/p>\n","protected":false},"excerpt":{"rendered":"

In August, Carlos Zarazaga (Federal Reserve Bank of Dallas) and Nobel Laureate Finn Kydland (UC Santa Barbara) came to CERGE-EI to meet with our Faculty member Marek Kapi\u010dka and finish their paper on Argentina\u2019s \u201cMissing Capital Puzzle\u201d. While being interviewed about their research, Carlos called Marek and Finn the best team of people he had … Continue reading Top Trio Helps to Explain Argentina\u2019s Problems<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":10,"featured_media":3553,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[180,1,59,143],"tags":[],"class_list":["post-3543","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-faculty","category-uncategorized","category-interview","category-special-events"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t