Public finance, trade, and development : the Chilean experience
AbstractThis paper analyzes the role of public finance and trade policies in the adjustment experience of Chile over the past 15 years. The purpose is to first review the Chilean public sector and trade reforms, and then to examine their role in the economic development of Chile. The paper is divided into six sections. After the Introduction, Section II presents a brief summary of the conditions in 1973 on the eve of the shift in Chilean policy. Section III focuses on the main policy reforms introduced by the military government over the 1973-82 period. Section IV takes a detailed look at Chile's public finance and trade reforms. The effect of the reforms on aggregate incentives and on the macroeconomic adjustment is the subject of Section V. Lastly, Section VI presents the following main conclusions. First, liberalization and stabilization reforms succeeded until late 1978 in slowing down inflation. Second, the reduction of a large public sector deficit required strong action. Third, the elimination of a large public sector deficit is a necessary but not sufficient condition for the control of inflation. Finally, once the macroeconomic mistakes of the late 1970's and early 1980's were corrected, Chile recovered its growth and reduced inflation.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 218.
Date of creation: 31 Jul 1989
Date of revision:
Economic Stabilization; Banks&Banking Reform; Economic Theory&Research; Environmental Economics&Policies; Public Sector Economics&Finance;
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- Jere H. Behrman, 1976. "Foreign Trade Regimes and Economic Development: Chile," NBER Books, National Bureau of Economic Research, Inc, number behr76-1.
- Corbo, Vittorio & de Melo, Jaime, 1987. "Lessons from the Southern Cone Policy Reforms," World Bank Research Observer, World Bank Group, vol. 2(2), pages 111-42, July.
- Fischer, Stanley, 1986. "Issues in Medium-term Macroeconomic Adjustment," World Bank Research Observer, World Bank Group, vol. 1(2), pages 163-82, July.
- Corbo, Vittorio & de Melo, Jaime & Tybout, James, 1986. "What Went Wrong with the Recent Reforms in the Southern Cone," Economic Development and Cultural Change, University of Chicago Press, vol. 34(3), pages 607-40, April.
- Rudiger Dornbusch & Juan Carlos de Pablo, 1990. "The Process of High Inflation," NBER Chapters, in: Developing Country Debt and Economic Performance, Volume 2: The Country Studies -- Argentina, Bolivia, Brazil, Mexico, pages 77-91 National Bureau of Economic Research, Inc.
- Ramirez, Miguel D., 1998. "Does public investment enhance labor productivity growth in Chile? A cointegration analysis," The North American Journal of Economics and Finance, Elsevier, vol. 9(1), pages 45-65.
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