On the Determinants of Chilean Economic Growth

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May 2004
This paper is part of the project "Explaining Economic Growth Performance" launched by the Global Development Network (GDN). The purpose of this project is to explain economic growth performances across seven regions of the world. This paper provides a qualitative and quantitative evaluation of the main factors behind Chilean growth: the main characteristics that made economic performance so average through the 1960s, so sensitive to the two major international crises in the early 1970s and early 1980s, and so simulative to growth rates and dampening to volatility from the mid-1980s onward. The first section looks at the history for the period under analysis. The next section uses a growth accounting exercise to approximate Total Factor Productivity (TFP). The results from that exercise are then used to conduct a multivariate time series analysis that includes several measures of economic distortions to assess which are important determinants (or consequences) of Chile's economic performance. Features found to be relevant are then incorporated into a model that attempts to quantify the growth effects of several shocks. Finally, the last section summarizes the main analytic conclusions and draws policy implications.