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On the determinants of the Chilean Economic Growth

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  • Rómulo A. Chumacero
  • J. Rodrigo Fuentes

Abstract

This paper presents several methodologies for understanding the Chilean growth process. By using univariate time series representations, we find that the Chilean data is more consistent with exogenous than with endogenous growth models. Growth accounting exercises show that the mild growth rates of the sixties are mainly due to the accumulation of human and physical capital, while the booms of the mid seventies and the one from 1985 until 1998 are mainly due to TFP growth. We also find that among the most important determinants of the evolution of TFP are the evolution of terms of trade, improvements on the quality of capital, and the presence of distortions. In fact, distortions do not only eliminate the positive effects of improvements on the quality of capital, but also precede the evolution of technology shocks and increase their volatility. A dynamic stochastic general equilibrium model that explicitly incorporates the relative price of investment with respect to consumption goods, terms of tra de, and distortionary taxes is able to successfully replicate the impulse-response functions found on the data. This exercise suggests that distortions play a key role in explaining the growth dynamics of the Chilean experience.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 134.

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Date of creation: Jan 2002
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Handle: RePEc:chb:bcchwp:134

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References

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  1. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2001. "A Decade Lost and Found: Mexico and Chile in the 1980s," NBER Working Papers 8520, National Bureau of Economic Research, Inc.
  2. Rómulo Chumacero Escudero, 2000. "Se busca una raíz unitaria: evidencia para Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 27(1 Year 20), pages 55-68, June.
  3. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
  4. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
  5. Bierens, Herman J., 1997. "Testing the unit root with drift hypothesis against nonlinear trend stationarity, with an application to the US price level and interest rate," Journal of Econometrics, Elsevier, vol. 81(1), pages 29-64, November.
  6. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "Data Appendix to A Decade Lost and Found: Mexico and Chile in the 1980s," Technical Appendices bergoeing02, Review of Economic Dynamics.
  7. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  8. Lau, Sau-Him Paul, 1997. "Using stochastic growth models to understand unit roots and breaking trends," Journal of Economic Dynamics and Control, Elsevier, vol. 21(10), pages 1645-1667, August.
  9. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164.
  10. Paul Lau, Sau-Him, 1999. "I(0) In, integration and cointegration out:: Time series properties of endogenous growth models," Journal of Econometrics, Elsevier, vol. 93(1), pages 1-24, November.
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Cited by:
  1. Sebastián Katz & Luis Lanteri & Sebastián Vargas, 2007. "A Subtle and not Always Understood Link over 50 Years: A Note on Investment Rate and Economic Growth," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(47), pages 7-62, April - J.
  2. Roberto Duncan, 2005. "How Well Does a Monetary Dynamics Equilibrium Model Account for Chilean Data?," Central Banking, Analysis, and Economic Policies Book Series, in: Rómulo A. Chumacero & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel ( (ed.), General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 6, pages 189-220 Central Bank of Chile.
  3. Francisco Gallego & Norman Loayza, 2002. "The Golden Period for Growth in Chile: Explanations and Forecasts," Working Papers Central Bank of Chile 146, Central Bank of Chile.
  4. Rodrigo Vergara & Rosario Rivero, 2005. "Productividad Sectorial en Chile: 1986-2001," Documentos de Trabajo 286, Instituto de Economia. Pontificia Universidad Católica de Chile..
  5. Rodrigo Fuentes & Mauricio Larraín & Klaus Schmidt-Hebbel, 2004. "Sources of Economic Growth and Total Factor Productivity in Chile," Working Papers Central Bank of Chile 287, Central Bank of Chile.
  6. J. Felipe Córdova, 2010. "Conventional Calibration Versus EDF Calibration," Working Papers Central Bank of Chile 589, Central Bank of Chile.
  7. Sebastián Katz & Luis Lanteri & Sebastián Vargas, 2007. "Investment and Growth: Half a Century of a Subtle and Frequently Misunderstood Relationship," BCRA Working Paper Series 200722, Central Bank of Argentina, Economic Research Department.
  8. Rodrigo Fuentes & Verónica Mies, 2005. "Mirando el Desarrollo Económico de Chile: Una Comparación Internacional," Working Papers Central Bank of Chile 308, Central Bank of Chile.
  9. Roberto Álvarez & Rodrigo Fuentes, 2004. "Patterns of Specialization and Economic Growth in Chile by Sector," Working Papers Central Bank of Chile 288, Central Bank of Chile.
  10. Gachet, Ivan & Maldonado, Diego & Oliva, Nicolas & Ramirez, Jose, 2011. "Hechos Estilizados de la Economía Ecuatoriana: El Ciclo Económico 1965-2008
    [Stylized Facts of the Ecuadorian Economy: The Economic Chicle 1965-2008]
    ," MPRA Paper 30280, University Library of Munich, Germany.
  11. J. Rodrigo Fuentes S. & Verónica Mies M., 2005. "Looking at Chile’s Economic Dvelopment From an International Perspective," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 8(1), pages 7-33, April.

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