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

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.

1979–2001: A Greek great depression through the lens of neoclassical growth theory

“…This translates to even higher respective increases in the capital-output ratio. This capital deepening feature is also observed in other great depression episodes (see for example Hayashi and Prescott (2002) for the case of Japan, Bergoeing et al (2002) for the case of Mexico, and Conesa et al (2007) for the case of Finland), although at a relatively smaller magnitude. What lies behind this large increase in the case of Greece?…”

Sudden stops, sectoral reallocations, and the real exchange rate

“…Given the value of ℓ t /ℓt = 0.267 from the data set of Bergoeing et al (2002), we can similarly calibrate η.…”

Cyclical dynamics of industrial production and employment: Markov chain-based estimates and tests

“…However, the breakpoint for IP growth comes later than this date. 6 For the impact of reforms undertaken in Chile in 1970's on its relative growth performance, see Bergoeing et al (2004). 7 See Xu (2011) for a discussion of the impact of China's institutional structure and reforms on its growth performance.…”