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

54 Pages Posted: 4 Oct 2001 Last revised: 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

Pontifical Catholic University of Chile - Institute of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 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.

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 (October 2001). NBER Working Paper No. w8520. Available at SSRN: https://ssrn.com/abstract=286192

Raphael Bergoeing

affiliation not provided to SSRN ( email )

Patrick J. Kehoe (Contact Author)

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 )

271 19th Avenue South
Minneapolis, MN 55455
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Timothy J. Kehoe

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

Pontifical Catholic University of Chile - Institute of Economics ( email )

Casilla 76
Correo 17
Santiago
Chile

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