An empirical assessment of two testable hypotheses of the Sraffian Supermultiplier for Argentina

Abstract

We conduct empirical analyses on Argentina from 1998 to 2023 to provide new evidence that GDP growth rate ultimately depends on the growth rate of autonomous demand, in line with the Sraffian Supermultiplier (SSM). Firstly, we estimate a Vector Equilibrium Correction Model (VECM) to establish the weak exogeneity of autonomous demand components, with output adjusting to long-run deviations between these autonomous components and GDP. Secondly, we test a mechanism adjusting productive capacity to demand based on the flexible accelerator principle. Employing a VAR analysis, we present evidence that investment share is Granger-caused by GDP, supporting the SSM framework.