RESEARCH ARTICLE

Jordão Fernandes de Andrade, Lucas Teixeira and Julia de Medeiros Braga | In Review of Keynesian Economics

This paper empirically analyses the relationship between investment share and growth in five major Latin American economies – Argentina, Brazil, Chile, Colombia and Mexico – from 1993 to 2017. The analysis draws on the Sraffian supermultiplier (SSM) framework, which establishes business investment as fully induced by the level and trend of effective demand and identifies long-run drivers of economic growth as non-capacity-creating autonomous expenditures. Business investment follows the capital stock adjustment principle, implying that investment share adjusts to different levels of economic growth. In the fully adjusted position, investment share is a positive function of autonomous expenditures growth rate. Our econometric analysis implements two Granger causality tests in dynamic panel models: first examining the investment share–output growth relationship, and second testing the investment share–autonomous expenditure growth rate relationship. The results suggest a unidirectional Granger causality relationship between autonomous demand and output growth rates and the investment share, supporting SSM results. These findings show that the SSM approach holds when extended to a broader range of countries, indicating the pervasiveness of such dynamics across diverse economic contexts.

Full article: https://doi.org/10.4337/roke.2026.02.07