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A decade lost and found: Mexico and Chile in the 1980s

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Author Info
Raphael Bergoeing
Patrick J. Kehoe
Timothy J
Kehoe
Raimundo Soto

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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.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 292.

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Date of creation: 2001
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Handle: RePEc:fip:fedmsr:292

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Keywords: Depressions Productivity

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-73, April. [Downloadable!] (restricted)
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  2. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 192, Department of Economics, Williams College. [Downloadable!]
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  3. Alexis Camhi & Eduardo Engel & Alejandro Micco, 1997. "Dinámica de empleo y productividad en manufactura: Evidencia micro y consecuencias macro," Documentos de Trabajo 19, Centro de Economía Aplicada, Universidad de Chile.
  4. Andrew Atkeson & Patrick J. Kehoe, 1995. "Industry evolution and transition: measuring investment in organization," Staff Report 201, Federal Reserve Bank of Minneapolis. [Downloadable!]
  5. Sebastian Edwards, 1996. "A Tale of Two Crises: Chile and Mexico," NBER Working Papers 5794, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Guner, Nezih & Ventura, Gustavo & Xu, Yi, 2007. "Macroeconomic Implications of Size-Dependent Policies," CEPR Discussion Papers 6138, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Lucas Navarro & Raimundo Soto, 2006. "Procyclical Productivity in Manufacturing," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 43(127), pages 193-220. [Downloadable!]
  3. Rodrigo Garcá-Verdú, 2005. "Factor Shares from Household Survey Data," DEGIT Conference Papers c010_057, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  4. Diego Restuccia, 2008. "The Latin American Development Problem," Working Papers tecipa-318, University of Toronto, Department of Economics. [Downloadable!]
  5. Rodrigo Vergara & Rosario Rivero, 2005. "Productividad Sectorial en Chile: 1986-2001," Documentos de Trabajo 286, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
  6. David Greenstreet, 2007. "Exploiting Sequential Learning to Estimate Establishment-Level Productivity Dynamics and Decision Rules," Economics Series Working Papers 345, University of Oxford, Department of Economics. [Downloadable!]
  7. Diego Restuccia & Richard Rogerson, 2007. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Working Papers tecipa-283, University of Toronto, Department of Economics. [Downloadable!]
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  8. Orlando Gracia & Hernando Zuleta, 2005. "The Free Trade Agreement between Colombia and USA: What can happen to Colombia?," DEGIT Conference Papers c010_023, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
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