The Chilean Economy: Policy Lessons and Challenges

Should countries in Latin America and Eastern Europe follow the Chilean approach to economic restructuring, market liberalization, and stabilization? Following years of hyperinflation and domestic turmoil, Chile undertook a series of dramatic economic reforms. Chile has also served as a social laboratory for such policies as privatization and social security reform that are of interest to both developed and developing economies. Having implemented much of the original reform program and emerging in the 1990s with a new democratic government, Chile also raises interesting questions about what comes next in its policies to promote growth. The advent in the 1990s of Chile as a model for economic reform is something of a surprise. Many of the reforms were actually introduced in the 1970s, and for a number of years many seemed to have failed to achieve their primary objectives. The more recent, positive view of the Chilean experience results from developments after 1983. Since then, the Chilean economy has grown robustly. What remains controversial is the question why the benefits of the reforms took so long to emerge. In this book, international scholars review the reforms in Chile and assess their effectiveness. They evaluate stabilization policy, economic growth, privatization, reform of the social security system, and the politics of economic reform. Now that many of the original reforms have been largely completed, and Chile has maintained a coherent macroeconomic policy with slowly declining inflation, the authors prescribe what Chile must do to sustain growth in the future. In addition to the editors, contributors include Eduardo Bitran, University of Chile; Vittorio Corbo, Catholic University of Chile; Peter Diamond, MIT; Sebastian Edwards, University of California, Los Angeles, and the World Bank; Stanley Fischer, MIT; Felipe Larrain B., Catholic University of Chile; Mario Marcel, IDB; Manuel Marfan, CIEPLAN; Raul E. Saez, CIEPLAN; Andres Solimano, the World Bank; Andres Velasco, New York University; and Salvador Valdes-Prieto, Catholic University of Chile.