Uncertainty in the Ecuadorian economy: An analysis of its relationship with the components of GDP Uncertainty in the Ecuadorian economy: An analysis of its relationship with the components of PIB

Abstract

In economics, vast theoretical and empirical evidence demonstrates the importance of uncertainty in individual and collective behavior. For example, the intertemporal consumption model states that current consumption decisions depend not only on current economic conditions and needs, but also on an individual's expectations of future income and consumption. In this context, several studies affirm that public policies that promote the economic and social development of a country have a greater impact in societies with low levels of risk and uncertainty. However, Latin America is characterized by maintaining high levels of uncertainty, which can generate inefficiency in the results of its policies, in addition to poor management of public resources. In this work, the dynamics of uncertainty among consumers (Consumer Confidence Index), producers (Business Confidence Index), and external agents (Country Risk) in Ecuador are analyzed. Through a model of distributed lags and estimates with Generalized Least Squares, its contribution to economic growth and the elements of the country's Domestic Aggregate Demand is evaluated. The results show that higher levels of uncertainty from external agents (country risk) are related to lower growth in investment, household consumption and public spending. On the other hand, it is shown that household consumption is an element that systematically shows stability and independence from these uncertainty factors.