Has Latin America's Post-Reform Growth Been Disappointing?

38 Pages Posted: 20 Apr 2016

See all articles by William Easterly

William Easterly

New York University - Department of Economics

Norman Loayza

World Bank - Research Department

Peter J. Montiel

Williams College - Department of Economics

Date Written: August 1996

Abstract

The response of economic growth to reforms in Latin America has not been disappointing. Because of those policy changes, and despite a global slowdown, Latin America did well to return to its historic growth rate of 2 percent per capita in 1990-93. After years of poor macroeconomic performance, many Latin American countries undertook ambitious programs of macroeconomic stabilization and structural reform in recent years. This change in policy created high expectations for the region, and some observers have questioned whether actual growth outcomes in several Latin American countries have lived up to these expectations.

Easterly, Loayza, and Montiel offer evidence that the response of economic growth to reforms in Latin America has not been disappointing. Because of those significant policy changes, and despite a global slowdown, Latin America did well to return to its historic growth rate of 2 percent per capita in 1990-93. Latin American growth has responded to changes in policy variables, as would have been predicted by the experience of other times and places. Those earlier experiences are summarized by a panel regression spanning many countries and multiyear periods from 1960 to 1993. To get consistent estimates of the parameters linking growth and policy variables, the authors use a dynamic panel methodology that both controls for unobserved time- and country-specific effects and accounts for the likely joint endogeneity of the explanatory variables.

This paper - a product of the Macroeconomics and Growth Division, Policy Research Department - is part of a larger effort in the department to understand the determinants of economic growth.

Suggested Citation

Easterly, William and Loayza, Norman and Montiel, Peter J., Has Latin America's Post-Reform Growth Been Disappointing? (August 1996). World Bank Policy Research Working Paper No. 1708. Available at SSRN: https://ssrn.com/abstract=614969

William Easterly (Contact Author)

New York University - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

Norman Loayza

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Peter J. Montiel

Williams College - Department of Economics ( email )

Fernald House
Office: Fernald 14
Williamstown, MA 01267
United States
413-597-2103 (Phone)
413-597-4045 (Fax)

HOME PAGE: http://www.williams.edu/Economics/faculty/montiel.htm

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