|Cesar Calderon, Pablo Fajnzylber, and Norman Loayza
||July 1, 2002
||Adobe Acrobat (PDF) [550 KB]
After repeated international crises, cases of interrupted reforms, and instances of macroeconomic mismanagement, several countries in Latin America and the Caribbean are experiencing severe economic downturns at the start of the new century. Just as in the aftermath of the Tequila crisis, the success of market-oriented reforms is called into question, and people from politicians to academics propose a change of economic policy away from the “Washington Consensus.” In this context, it becomes necessary to reassess the growth performance of countries in the region, explain the underlying sources of their economic growth –or lack thereof-, and design a strategy for further reform. This study intends to contribute to this effort. We cannot overstate the importance of income growth for economic, social, and even political development. Countries that grow strongly and for sustained periods of time are able to reduce significantly their poverty levels, strengthen their democratic and political stability, improve the quality of their natural environment, and even diminish the incidence of crime and violence.1 Economic growth is not a panacea; but even in the cases where it does not have a direct beneficial impact, it facilitates the implementation of public programs that address the people, places, and issues left behind. No wonder, then, that enormous amount of talent and effort has been invested in
understanding the process of economic growth. The recent surge in academic research on endogenous growth and the policy preoccupation with poverty-alleviating growth are only two of many demonstrations that economic growth is at the center of attention in research and policy
circles. This study takes advantage of the received literature to analyze the growth performance in Latin America and the Caribbean, using in particular the methods and findings of
macroeconomic and cross-national empirical studies.