Investment, Macroeconomic Stability and Growth: The Latin American Experience
Keywords:
economic growth, factor accumulation, terms of trade, black market premium, investment rate, macroeconomic stabilityAbstract
The purpose of this paper is to explore the role of factor accumulation, economic policies, and economic and political uncertainties on growth performance of Latin American countries in the last three decades. We extend the work of Corbo and Rojas (1992) in two directions suggested by recent work in this area. First, we extend the model by considering terms of trade effects and an additional measure of distortion, the black market premium. Second, we provide further evidence of the channels through which economic policies affect growth by endogenizing the investment rate. The main conclusions are that the terms of trade affect growth directly, and indirectly through its effect in the investment rate; the black market premium is more a measure of macroeconomic instability than of the degree of oppenness; and stability of economic policies can affect growth directly through the law of motion for growth and indirectly through investment rates.Downloads
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Copyright (c) 1993 Vittorio Corbo, Patricio Rojas
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