Long-term Gain, Short-Term Pain: Assessing the Potential Impact of Structural Reforms in Chile
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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.
Series:
Working Paper No. 2015/282
Subject:
Consumption Education Human capital Infrastructure Labor Macrostructural analysis National accounts Structural reforms
English
Publication Date:
December 29, 2015
ISBN/ISSN:
9781513537634/1018-5941
Stock No:
WPIEA2015282
Pages:
35
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