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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.

Suggested Citation

  • Rómulo A. Chumacero & J. Rodrigo Fuentes, 2002. "On the determinants of the Chilean Economic Growth," Working Papers Central Bank of Chile 134, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:134
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    7. 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.
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    Cited by:

    1. 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.
    2. 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.
    3. Rodrigo Vergara & Rosario Rivero, 2006. "Productividad Sectorial en Chile: 1986-2001," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 43(127), pages 143-168.
    4. 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.
    5. 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.
    6. 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.
    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. Verónica Mies & Rodrigo Fuentes, 2005. "Mirando el Desarrollo Económico de Chile: Una Comparación Internacional," Documentos de Trabajo 287, Instituto de Economia. Pontificia Universidad Católica de Chile..
    9. J. Felipe Córdova, 2010. "Conventional Calibration Versus EDF Calibration," Working Papers Central Bank of Chile 589, Central Bank of Chile.
    10. 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.
    11. Iffat Ara, 2004. "Is Pakistan’s Manufacturing Sector Competitive?," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 685-706.
    12. Rómulo A.Chumacero & J.Rodrigo Fuentes, 2006. "Economic growth in Latin America: structural breaks or fundamentals," Estudios de Economia, University of Chile, Department of Economics, vol. 33(2 Year 20), pages 141-154, December.
    13. 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.
    14. 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 (S (ed.), General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 6, pages 189-220 Central Bank of Chile.

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