NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Decade Lost and Found: Mexico and Chile in the 1980s

Raphael Bergoeing, Patrick J. Kehoe, Timothy J. Kehoe, Raimundo Soto

NBER Working Paper No. 8520
Issued in October 2001
NBER Program(s):   EFG   IFM

Chile and Mexico experienced severe economic crises in the early 1980s. This paper analyzes four possible explanations for why Chile recovered much faster than did Mexico. Comparing data from the two countries allows us to rule out a monetarist explanation, an explanation based on falls in real wages and real exchange rates, and a debt overhang explanation. Using growth accounting, a calibrated growth model, and economic theory, we conclude that the crucial difference between the two countries was the earlier policy reforms in Chile that generated faster productivity growth. The most crucial of these reforms were in banking and bankruptcy procedures.

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Document Object Identifier (DOI): 10.3386/w8520

Published: Bergoeing, Raphael, Patrick J. Kehoe, Timothy J. Kehoe and Raimundo Soto. "A Decade Lost And Found: Mexico And Chile In The 1980s," Review of Economic Dynamics, 2002, v5(1,Jan), 166-205. citation courtesy of

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