Dynamic Paths of Economic Openness Experiments in Latin America: A Small Intertemporal CGE Model

Ruben Mercado

MPRA Paper from University Library of Munich, Germany

Abstract: What might be the dynamic consequences of abrupt economic openness policies under a fixed exchange rate regime for a “typical” Latin American country? In this essay, I specify, calibrate and simulate a small dynamic intertemporal computable general equilibrium model to explore some scenarios related to the implementation of that type of policies. In Section 1, I review the main characteristics of a “typical” Latin American economy in terms of production structure, consumption and saving behavior, and fiscal and balance of trade features. In Section 2, I build a small intertemporal CGE with a forward-looking modem investment sector as its “dynamic core”. In Section 3 I present the model parameterization and a base case solution. In Section 4 I perform some computational policy experiments, showing how abrupt economic openness under a fixed exchange rate regime and anticipated foreign lending constraints may result, if overall productivity gains do not materialize in time, in a short-term investment boom followed by an exchange rate regime crisis. Finally, in Section 5 I present some concluding remarks.

Keywords: Computable; General; Equilibrium; -; Latin; America; -; Economic; Openess; Experiments (search for similar items in EconPapers)
JEL-codes: C68 F4 F41 (search for similar items in EconPapers)
Date: 1995-11, Revised 1995-11
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:127714

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