Bolivia’s Economic Pivot: The Making of a Macroeconomic Crisis

Fernando Garcia, Guillermo Arcay, Ricardo Hausmann and Alejandro Werner
Additional contact information
Guillermo Arcay: Harvard's Growth Lab

No 261, Growth Lab Working Papers from Harvard's Growth Lab

Abstract: Bolivia’s macroeconomic crisis was long in the making. A temporary commodity windfall and a gas export engine built in the 1990s delivered a decade of growth, rising fiscal revenues, and an unprecedented buildup of foreign assets. But instead of using that window to build new sources of tradable income and productive capacity, the country adopted policies that gradually weakened the very gas sector on which the model depended. As gas production and hydrocarbon revenues fell, the state chose to preserve spending and the fixed exchange rate. The result was a sequence of increasingly costly stopgaps: first the depletion of international reserves, then the collapse of the peg, the rise of the inflation tax, and financial repression. In the process, households saw the real value of their savings eroded through the pension system and bank deposits. This paper shows how that strategy delayed adjustment for nearly a decade while making the eventual crisis more severe. Using counterfactual benchmarks for output and the real exchange rate, it quantifies the cost of delay and the scale of the distortions that any stabilization program must now unwind.

Keywords: Bolivia (search for similar items in EconPapers)
Date: 2026-04
References: Add references at CitEc
Citations:

Downloads: (external link)
https://growthlab.hks.harvard.edu/wp-content/uploa ... t-macro1-spanish.pdf (application/pdf)
https://growthlab.hks.harvard.edu/wp-content/uploa ... t-macro1-english.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:glh:wpfacu:261

Access Statistics for this paper

More papers in Growth Lab Working Papers from Harvard's Growth Lab
Bibliographic data for series maintained by Chuck McKenney ().