Are the Washington Consensus Policies Sustainable? Game Theoretical Assessment for the Case of Ecuador

Pedro Francisco Páez

Working Paper Series, Department of Economics, University of Utah from University of Utah, Department of Economics

Abstract: This paper presents an evaluation of the so-called Washington Consensus economic policies in the case of Ecuador during the eighties and the nineties in a game theoretical framework. In a multi-period game, in which it acts as Stackelberg leader, the government minimizes a quadratic loss function using stochastic dynamic control techniques. A system of simultaneous equations represents the private agents' aggregate best responses that result from the general equilibrium solutions to the different agents' optimization problems. Its dynamic features show a stable system by itself, isolated from the type of policies that the government chooses. However, the introduction of the specific style of neo-liberal policies typical of the Washington Consensus, econometrically captured as they were applied in Ecuador, generates an explosive dynamics in every state variable of the system, suggesting that these types of policies are intrinsically unsustainable.

Keywords: economic policy evaluation; poverty; sustainability; neoliberal reforms (search for similar items in EconPapers)
JEL-codes: C5 C6 C7 E6 I3 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2005
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:uta:papers:2005_07

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