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The Golden Period For Growth In Chile: Explanations And Forecasts

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  • Francisco Gallego Y.
  • Norman Loayza O.

Abstract

Economic growth in Chile since the mid 1980s has been remarkable for its high level and persistence. This paper explores the factors behind the high growth rates of the past 15 years and analyzes the extent to which they can be sustained in the future. The first part of the paper presents some stylized facts about growth in Chile. Taken together, they suggest that the jump in growth was driven by policies and macroeconomic conditions that affected the economy’s overall productivity. The second part of the paper considers the large body of recent empirical growth literature to examine the extent to which a cross-country approach can explain Chile’s growth performance. It formulates a basic regression model that contains the most popular variables in the growth literature and estimates it using techniques suited for dynamic models of panel data. The basic model allows us to explain about 45% of the change in the growth rate between 1970-1985 and 1986-1998, which was 4.74 percentage points. When we expand the basic model to include the quality of the political system and governance, the comprehensiveness and complementarity of policy reforms, and the availability of public services and infrastructure, we can explain 73% of the growth improvement. The last part of the paper starts the assessment of possible new growth sources for Chile by, first, projecting the country’s growth rate for the next 10 years under various assumptions and, second, proposing some areas with potentially large returns.

Suggested Citation

  • Francisco Gallego Y. & Norman Loayza O., 2002. "The Golden Period For Growth In Chile: Explanations And Forecasts," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 5(1), pages 37-67.
  • Handle: RePEc:chb:bcchec:v:5:y:2002:i:1:p:37-67
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    2. Stijn Claessens & M. Ayhan Kose & Marco E. Terrones, 2011. "Recessions and Financial Disruptions in Emerging Markets: A Bird’s Eye View," Central Banking, Analysis, and Economic Policies Book Series,in: Luis Felipe Céspedes & Roberto Chang & Diego Saravia (ed.), Monetary Policy under Financial Turbulence, edition 1, volume 16, chapter 4, pages 059-104 Central Bank of Chile.
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    7. Norman Loayza & Pablo Fajnzylber & César Calderón, 2005. "Economic Growth in Latin America and the Caribbean : Stylized Facts, Explanations, and Forecasts," World Bank Publications, The World Bank, number 7315, April.
    8. Rodrigo Fuentes S. & Fabián Gredig U. & Mauricio Larraín E., 2008. "The output Gap in chile: Measurement and Evaluation," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(2), pages 7-30, August.
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    10. World Bank, 2007. "Costa Rica Poverty Assessment : Recapturing Momentum for Poverty Reduction," World Bank Other Operational Studies 7678, The World Bank.
    11. Claudio Candia & Medardo Aguirre & Natalia Correa & María J. Herrera, 2016. "La productividad total de factores en el sector manufacturero chileno," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 18(35), pages 229-255, July-Dece.
    12. J. Rodrigo Fuentes, 2011. "Una Mirada Desagregada del Deterioro de la Productividad en Chile: ¿Existe un Cambio Estructural?," Documentos de Trabajo 401, Instituto de Economia. Pontificia Universidad Católica de Chile..
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    14. Cristián Larroulet Vignau, 2003. "Políticas públicas para el desarrollo," Past Working Papers 20, Universidad del Desarrollo, School of Business and Economics.
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    17. Jorge Marshall R., 2002. "El Camino de las Reformas," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 5(1), pages 77-82, April.
    18. César Calderón & Roberto Duncan, 2003. "Purchasing power parity in an emerging market economy: a long- span study for Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 30(1 Year 20), pages 103-132, June.
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    21. Klaus Schmidt-Hebbel, 2012. "The Political Economy of Distribution and Growth in Chile," Documentos de Trabajo 417, Instituto de Economia. Pontificia Universidad Católica de Chile..
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