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

Posted: 13 Aug 2008

See all articles by Raphael Bergoeing

Raphael Bergoeing

affiliation not provided to SSRN

Patrick J. Kehoe

Federal Reserve Bank of Minneapolis - Research Department; University of Minnesota - Twin Cities - Department of Economics; National Bureau of Economic Research (NBER)

Timothy J. Kehoe

University of Minnesota - Twin Cities - Department of Economics; National Bureau of Economic Research (NBER)

Raimundo Soto

Pontificia Universidad Católica de Chile - Institute of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 2001

Abstract

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.

Keywords: Chile, Mexico, Growth Accounting, Total Factor Productivity, Depression

JEL Classification: E32, N16, O40

Suggested Citation

Bergoeing, Raphael and Kehoe, Patrick J. and Kehoe, Timothy J. and Soto, Raimundo, A Decade Lost and Found: Mexico and Chile in the 1980s (September 2001). Available at SSRN: https://ssrn.com/abstract=1221662

Raphael Bergoeing

affiliation not provided to SSRN ( email )

Patrick J. Kehoe

Federal Reserve Bank of Minneapolis - Research Department ( email )

90 Hennepin Avenue
Minneapolis, MN 55480
United States
612-204-5525 (Phone)
612-204-5515 (Fax)

University of Minnesota - Twin Cities - Department of Economics ( email )

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Minneapolis, MN 55455
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Timothy J. Kehoe (Contact Author)

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
1169 Management & Economics
Minneapolis, MN 55455
United States
612-625-1589 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Raimundo Soto

Pontificia Universidad Católica de Chile - Institute of Economics ( email )

Casilla 76
Correo 17
Santiago
Chile

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