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Are the Washington Consensus Policies Sustainable? Game Theoretical Assessment for the Case of Ecuador

  • Pedro Francisco Páez
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    This paper presents an evaluation of the so-called Washington Consensus economic policies in the case of Ecuador during the eighties and the nineties in a game theoretical framework. In a multi-period game, in which it acts as Stackelberg leader, the government minimizes a quadratic loss function using stochastic dynamic control techniques. A system of simultaneous equations represents the private agents' aggregate best responses that result from the general equilibrium solutions to the different agents' optimization problems. Its dynamic features show a stable system by itself, isolated from the type of policies that the government chooses. However, the introduction of the specific “style” of neo-liberal policies typical of the Washington Consensus, econometrically captured as they were applied in Ecuador, generates an explosive dynamics in every state variable of the system, suggesting that these types of policies are intrinsically unsustainable.

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    File URL: http://economics.utah.edu/research/publications/2005_07.pdf
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    Paper provided by University of Utah, Department of Economics in its series Working Paper Series, Department of Economics, University of Utah with number 2005_07.

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    Length: 51 pages
    Date of creation: 2005
    Date of revision:
    Handle: RePEc:uta:papers:2005_07
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    Web page: http://economics.utah.edu

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    1. repec:cup:cbooks:9780521104609 is not listed on IDEAS
    2. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, June.
    3. repec:cup:cbooks:9780521634809 is not listed on IDEAS
    4. Amman, Hans M & Kendrick, David A, 1999. "Should Macroeconomic Policy Makers Consider Parameter Covariances?," Computational Economics, Society for Computational Economics, vol. 14(3), pages 263-67, December.
    5. Banerjee, Anindya & Hendry, David F & Mizon, Grayham E, 1996. "The Econometric Analysis of Economic Policy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 573-600, November.
    6. repec:dgr:uvatin:19970102 is not listed on IDEAS
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