Where Did the Trade Liberalization Drive Latin American Economy: A Cross Section Analysis

25 Pages Posted: 20 Apr 2005

See all articles by Dr. Rajagopal

Dr. Rajagopal

EGADE Business School, Tecnologico de Monterrey (ITESM) - Mexico City Campus; Metropolitan College, Boston University

Multiple version iconThere are 2 versions of this paper

Date Written: April 2005

Abstract

The institutional reforms towards trade liberalizations in Latin America during the 1980s and the 1990s have introduced a good measure of import competition, but trade policies alone are not sufficient to create a competitive environment in an economy. The countries in Latin America have not had much experience with competition policies in the past. Combined with restrictive trade policies, the absence of competition policies has often led to monopolized domestic markets. The balance of payments crisis shocks have also contributed significantly to differences in growth performance and associated with a large decline of growth rates and develops into another crisis in the future. The trade competitiveness among the countries of Latin American region have revealed higher export sensitivity to world commodity prices, domestic absorption and economic activity combined with a high income elasticity of imports.

This paper attempts to analyze the extent of trade competitiveness and its impact on the economic welfare measures in the Latin American countries. The analysis concentrates on the total factor productivity and exports in the countries of the region in reference to the economic growth pattern emerged during 1950-2003. The Cobb-Douglas function has been used to measure the total factor productivity and Nash equilibrium has been calculated to measure the economic welfare gains among the trading blocs in the Latin American region. The results of the study determine that international liquidity, financial soundness, real exchange rate depreciation and monetary policy play a critical role in reducing output losses and increasing the economic welfare gains.

Keywords: Trade liberalization, institutional reforms, total factor productivity, regional growth, trading blocs, foreign direct investment, economic welfare, Latin America

JEL Classification: C13, C71, F43, F15, F18, O47

Suggested Citation

Rajagopal, Dr., Where Did the Trade Liberalization Drive Latin American Economy: A Cross Section Analysis (April 2005). Available at SSRN: https://ssrn.com/abstract=702604 or http://dx.doi.org/10.2139/ssrn.702604

Dr. Rajagopal (Contact Author)

EGADE Business School, Tecnologico de Monterrey (ITESM) - Mexico City Campus ( email )

Carlos Lazo, 100
Santa Fe
Mexico City, DF 01389
Mexico

HOME PAGE: http://prof-rajagopal.com

Metropolitan College, Boston University ( email )

United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
172
Abstract Views
1,935
Rank
188,858
PlumX Metrics