Long-term Gain, Short-Term Pain: Assessing the Potential Impact of Structural Reforms in Chile

December 29, 2015

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Marika Santoro. Long-term Gain, Short-Term Pain: Assessing the Potential Impact of Structural Reforms in Chile, (USA: International Monetary Fund, 2015) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

In this paper, I study the potential economic impact of the 2015-18 structural reform agenda in Chile, using the IMF dynamic general equilibrium model (GIMF). I find that the agenda has the potential to significantly increase Chile’s long-run GDP, although it may have some negative effects in the short term. Ensuring a smooth transition to a higher productive potential depends on three key dimensions: the credibility of the reforms, their effectiveness in closing structural gaps, and their speed of implementation. Badly designed reforms that remove only a very small fraction of the existing structural gaps, at a slow speed, and with little credibility, can greatly reduce the positive impact of the reform agenda on GDP.

Subject: Consumption, Education, Human capital, Infrastructure, Labor, Macrostructural analysis, National accounts, Structural reforms

Keywords: Asia and Pacific, Capital factor share parameter, Chilean economy, Consumption, Cost of capital, Education quality, Human capital, Infrastructure, Infrastructure network, Investment goods, Macroeconomic analysis, School voucher system, Structural reforms, Telecommunication industry, Telecommunication infrastructure, Utility function, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/282
Stock No:

WPIEA2015282
ISBN:

9781513537634
ISSN:

1018-5941

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