Has Latin America's post-reform growth been disappointing?

William Easterly, Norman Loayza, Peter Montiel

    Research output: Contribution to journalArticle

    Abstract

    After years of poor macroeconomic performance, many Latin American countries undertook ambitious programs of macroeconomic stabilization and structural reform during recent years. The change in policy created high expectations for the region. Some observers question, however, whether actual growth outcomes in several Latin American countries have measured up to such expectations. This paper offers some evidence that the response of economic growth to reforms in Latin America has not been disappointing. Because of the significant changes in policies achieved in Latin America by the 1990s and in spite of the global slowdown, Latin America did well to return to its historic rate of growth of 2 percent per capita in 1991-93. Latin American growth has responded to changes in policy variables as would have been predicted by the experience of other times and places, as summarized by a panel regression spanning a large number of countries and multi-year periods from 1960 to 1993. In order to obtain consistent estimates of the parameters linking policy variables and growth, this paper uses 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.

    Original languageEnglish (US)
    Pages (from-to)287-311
    Number of pages25
    JournalJournal of International Economics
    Volume43
    Issue number3-4
    DOIs
    StatePublished - Nov 1 1997

    Keywords

    • Dynamic panel methodology
    • Latin america
    • Macroeconomic stabilization

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics

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