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Public finance, trade, and development : the Chilean experience

Author

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  • Corbo, Vittorio
Abstract
This paper analyzes the role of public finance and trade policies in the adjustment experience of Chile over the past 15 years. The purpose is to first review the Chilean public sector and trade reforms, and then to examine their role in the economic development of Chile. The paper is divided into six sections. After the Introduction, Section II presents a brief summary of the conditions in 1973 on the eve of the shift in Chilean policy. Section III focuses on the main policy reforms introduced by the military government over the 1973-82 period. Section IV takes a detailed look at Chile's public finance and trade reforms. The effect of the reforms on aggregate incentives and on the macroeconomic adjustment is the subject of Section V. Lastly, Section VI presents the following main conclusions. First, liberalization and stabilization reforms succeeded until late 1978 in slowing down inflation. Second, the reduction of a large public sector deficit required strong action. Third, the elimination of a large public sector deficit is a necessary but not sufficient condition for the control of inflation. Finally, once the macroeconomic mistakes of the late 1970's and early 1980's were corrected, Chile recovered its growth and reduced inflation.

Suggested Citation

  • Corbo, Vittorio, 1989. "Public finance, trade, and development : the Chilean experience," Policy Research Working Paper Series 218, The World Bank.
    • Handle: RePEc:wbk:wbrwps:218
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    References listed on IDEAS

    as
    1. Vittorio Corbo & Jaime de Melo & James Tybout, 2015. "What Went Wrong with the Recent Reforms in the Southern Cone," World Scientific Book Chapters, in: Developing Countries in the World Economy, chapter 2, pages 21-54, World Scientific Publishing Co. Pte. Ltd..
    2. Jere H. Behrman, 1976. "Foreign Trade Regimes and Economic Development: Chile," NBER Books, National Bureau of Economic Research, Inc, number behr76-1.
    3. Rudiger Dornbusch & Juan Carlos de Pablo, 1990. "The Process of High Inflation," NBER Chapters, in: Developing Country Debt and Economic Performance, Volume 2: Country Studies—Argentina, Bolivia, Brazil, Mexico, pages 77-91, National Bureau of Economic Research, Inc.
    4. Fischer, Stanley, 1986. "Issues in Medium-term Macroeconomic Adjustment," The World Bank Research Observer, World Bank, vol. 1(2), pages 163-182, July.
    5. Corbo, Vittorio & de Melo, Jaime, 1987. "Lessons from the Southern Cone Policy Reforms," The World Bank Research Observer, World Bank, vol. 2(2), pages 111-142, July.
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    Cited by:

    1. MD. Ramirez, 2000. "Public capital formation and labor productivity growth in Chile," Contemporary Economic Policy, Western Economic Association International, vol. 18(2), pages 159-169, April.
    2. Ramirez, Miguel D., 1998. "Does public investment enhance labor productivity growth in Chile? A cointegration analysis," The North American Journal of Economics and Finance, Elsevier, vol. 9(1), pages 45-65.

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