In an earlier post (here and here), I found that the best forecasting model for Argentina was the LA20 Model (Latin America Regional Economy). Out until 2100 (the furthest out the IPCC is willing to go on Global Emission Scenarios), it looks as if Latin American Integration would provide a desirable future, at least for Argentina (here). This post explores what happens after 2100, out to 2500. Of course, no one knows the future (especially out to 2500), but the LA20 Model is a computer program that can be run out to any date. Sometimes it is insightful just to see what happens!
The LA20 Model is unstable and cyclical (the eigenvalues and AIC statistics are presented in the graphic above for the Business as Usual BAU model). In the Phase Plot, above, time moves from left to right and cycles increase in magnitude and severity. Although the short-term future might look attractive, the long-term future is not. Luckily, a lot (maybe everything) can change after 2100, especially in the face of Environmental Crisis.
Another reason to look at long-run cycles in Latin America is that cycles (particularly Kondratiev Waves or K-Waves) are discussed extensively and qualitatively in World-Systems Theory. It is refreshingly concrete to see actual historical cycles tested with a statistically estimated model. However, a future of unstable cycles is probably one reason why Latin American Integration has been so problematic.
Notes
You can experiment with the LA20 BAU model here. Suggestions are given in the code for how to stabilize the model.
Ex. 1.0 Can you find a way to eliminate cycles once the model has been stabilized?
The solution to this Exercise can be found in the LA_TECHP model which I will describe in a future post.
Descriptions of the how the Dynamic Component State Space models are constructed are given in the Boiler Plate.
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