A Decade Lost and Found: Mexico and Chile in the 1980s

Raphael Bergoeing (), Patrick J. Kehoe (), Timothy J. Kehoe () and Raimundo Soto ()

No 110, Documentos de Trabajo from Centro de Economía Aplicada, Universidad de Chile

Abstract: Chile and Mexico experienced severe economic crises in the early 1980s. This paper analyzes four possible explanations for why Chile recovered much faster than did Mexico. Comparing data from the two countries allows us to rule out a monetarist explanation, an explanation based on falls in real wages and real exchange rates, and a debt overhang explanation. Using growth accounting, a calibrated growth model, and economic theory, we conclude that the crucial difference between the two countries was the earlier policy reforms in Chile that generated faster productivity growth. The most crucial of these reforms were in banking and bankruptcy procedures.

New Economics Papers: this item is included in nep-ifn
Date: 2001
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Working Paper: A Decade Lost and Found: Mexico and Chile in the 1980s (2001)
Working Paper: A Decade Lost and Found: Mexico and Chile in the 1980s (2001)
Working Paper: A decade lost and found: Mexico and Chile in the 1980s (2001)
Journal Article: A Decade Lost and Found: Mexico and Chile in the 1980s (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:edj:ceauch:110

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