Macroeconomic Constraints for Medium Term Growth and Distribution: A Model for Chile

48 Pages Posted: 20 Apr 2016

See all articles by Cevdet Denizer

Cevdet Denizer

Center for Economics and Econometrics; World Bank

Raj M. Desai

Georgetown University; The Brookings Institution

Nikolay Gueorguiev

International Monetary Fund (IMF)

Date Written: April 30, 1990


The recovery of the Chilean economy since the mid 1980s, has certainly been successful in macroeconomic terms. In fact, the restoration of growth and the correction of external imbalances after the severe economic crises of 1982 -83 has taken place in a macroeconomic environment of moderate inflation, without major fiscal imbalances, exports have expanded significantly and foreign debt burden indicators have improved. However, distributive and poverty related indicators point to pending problems. The major challenge, therefore, is to maintain sustainable rates of economic growth, address the social issues of poverty reduction and improve income distribution patterns, while preserving macroeconomic and financial stability. The paper is organized as follows : Section I is an introduction. Section II presents a formal macroeconomic model that identifies major constraints ( external, savings and fiscal ) that shape the scope for growth. In Section III the model is numerically calibrated with parameters of the economy and three policy exercises are explored : i) an increase in public spending; ii) a reduction of interest payments of 3 of potential GDP; and iii) a reduction of the markup rate of 4. Section IV reviews various policy excercises and the conclusions are summarized in Section V.

Keywords: Achieving Shared Growth, Environmental Economics & Policies, Economic Stabilization, Economic Theory & Research, Banks & Banking Reform

Suggested Citation

Denizer, Cevdet and Desai, Raj M. and Gueorguiev, Nikolay, Macroeconomic Constraints for Medium Term Growth and Distribution: A Model for Chile (April 30, 1990). World Bank Policy Research Working Paper No. 400, Available at SSRN:

Cevdet Denizer (Contact Author)

Center for Economics and Econometrics ( email )

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+902123596505 (Phone)
+902122872453 (Fax)


World Bank ( email )

1818 H Street, N.W.
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Raj M. Desai

Georgetown University ( email )

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Washington, DC 20057-0002
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The Brookings Institution ( email )

1775 Massachusetts Ave., NW
Washington, DC 20036
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Nikolay Gueorguiev

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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