Has Latin America's post-reform growth been disappointing?

After years of poor economic performance, many Latin American countries undertook ambitious programs of macroeconomic stabilization and structural reform in recent years. This change in policy created high expectations for the region, and some observers have questioned whether actual growth outcomes have lived up to these expectations. The authors offer evidence that the response of economic growth to reforms in Latin America has not been disappointing. Because of their significant policy changes, and despite a global slowdown, Latin America did well to return to its historic growth rate of 2 percent per capita in 1990-93. Latin America has responded to changes in policy variables, as would have been predicted by the experience of other times and places. Those earlier experiences are summarized by a panel regression spanning many countries and multi-year periods from 1960 to 1993. To get consistent estimates of the parameters linking growth and policy variables, the authors use a dynamic panel methodology that both controls for unobserved time- and country-specific effects and accounts for the likely internal dynamism of the explanatory variables.