The Fall and Recovery of the Cuban Economy in the 1990's: Mirage or Reality?

IMF Working Papers, May 1, 2001

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The Fall and Recovery of the Cuban Economy in the 1990's: Mirage or Reality?

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Bibliographic details

• Authors: Ernesto Hernández-Catá
• Published: May 1, 2001
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451846744.001

Summary

• The collapse of the Cuban economy following the cessation of Soviet assistance gave way to a strong recovery in 1994-96.
• Three possible explanations for this recovery are identified:
  • (i) that it never took place;
  • (ii) that it reflected a surge in productivity resulting from stabilization and liberalization in 1993-94;
  • (iii) that it resulted from a favorable aggregate demand shock.
• The second explanation—the most persuasive—suggests that a strong and durable expansion will probably not be achieved on the basis of present policies, but that the benefits of a full liberalization of the economy are likely to be considerable.

Findings and Analysis

• Timing:
  • Recovery period identified as 1994-96.
  • Stabilization and liberalization episode dated 1993-94.
• Explanatory hypotheses:
  • Hypothesis (i): No recovery actually occurred.
  • Hypothesis (ii): Recovery due to surge in productivity linked to stabilization and liberalization in 1993-94 (deemed most persuasive).
  • Hypothesis (iii): Recovery due to a favorable aggregate demand shock.
• Policy inference:
  • Under current policies, a strong and durable expansion is unlikely.
  • Full liberalization of the economy is likely to yield considerable benefits.

Policy Recommendations and Implications

• Consider full liberalization of the economy to realize potentially considerable benefits.
• Recognize that stabilization and liberalization measures (as in 1993-94) are associated with productivity surges and can be central to recovery.
• Exercise caution in attributing recovery purely to demand-side factors without accounting for productivity and structural reforms.

Publication and Metadata

• Author: Ernesto Hernández-Catá
• Publication date: May 1, 2001
• Series: Working Paper No. 2001/048
• Issue: 048
• Volume: 2001
• Pages: 25
• DOI: https://doi.org/10.5089/9781451846744.001
• Stock No: WPIEA0482001
• ISBN: 9781451846744
• ISSN: 1018-5941
• Subject terms: Employment, Labor, Labor force, Price controls, Prices, Production, Productivity, Total factor productivity
• Keywords: balance of payments, Baltics, Central and Eastern Europe, Cuba, demand shock, Eastern Europe, Employment, fixed capital, GDP deflator, growth, growth performance, Labor force, liberalization, liberalization measure, output index, Price controls, price liberalization, productivity, Total factor productivity, transition, WP

Source: IMF Working Papers — "The Fall and Recovery of the Cuban Economy in the 1990's: Mirage or Reality?", Ernesto Hernández-Catá, May 1, 2001.

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