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

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  • Easterly, William
  • Loayza, Norman
  • Montiel, Peter

Abstract

After years of poor economic performance, many Latin American countries undertook ambitious programs of macroeconomic stabilization andstructural 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.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1708.

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Date of creation: 31 Jan 1997
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Handle: RePEc:wbk:wbrwps:1708

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Keywords: Economic Theory&Research; Environmental Economics&Policies; Economic Conditions and Volatility; Statistical&Mathematical Sciences; ICT Policy and Strategies; Achieving Shared Growth; Economic Theory&Research; Governance Indicators; Health Monitoring&Evaluation; Economic Growth;

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  1. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
  2. William Easterly & Michael Kremer & Lant Pritchett & Lawrence H. Summers, 1993. "Good Policy or Good Luck? Country Growth Performance and Temporary Shocks," NBER Working Papers 4474, National Bureau of Economic Research, Inc.
  3. Michael Bruno & William Easterly, 1995. "Inflation Crises and Long-Run Growth," NBER Working Papers 5209, National Bureau of Economic Research, Inc.
  4. Ann Harrison, 1995. "Openness and Growth: A Time-Series, Cross-Country Analysis for Developing Countries," NBER Working Papers 5221, National Bureau of Economic Research, Inc.
  5. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  6. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  7. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc.
  8. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
  9. Easterly, William, 1991. "Economic stagnation, fixed factors, and policy thresholds," Policy Research Working Paper Series 795, The World Bank.
  10. De Gregorio, Jose, 1992. "Economic growth in Latin America," Journal of Development Economics, Elsevier, vol. 39(1), pages 59-84, July.
  11. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  12. Levine, Ross & Zervos, Sara J, 1993. "What We Have Learned about Policy and Growth from Cross-Country Regressions?," American Economic Review, American Economic Association, vol. 83(2), pages 426-30, May.
  13. Eliana A. Cardoso & Albert Fishlow, 1989. "Latin American Economic Development: 1950-1980," NBER Working Papers 3161, National Bureau of Economic Research, Inc.
  14. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  15. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
  16. White, Halbert, 1982. "Instrumental Variables Regression with Independent Observations," Econometrica, Econometric Society, vol. 50(2), pages 483-99, March.
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