Potential Output Growth in Emerging Market Countries : The Case of Chile

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Potential Output Growth in Emerging Market Countries : The Case of Chile
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Volume/Issue:
1997/104
Series:
IMF Working Papers
Author(s):
Jorge Roldos
Publisher:
INTERNATIONAL MONETARY FUND
Published Date:
September 1997
DOI:
http://dx.doi.org/10.5089/9781451947977.001
ISBN:
9781451947977
ISSN:
1018-5941
Page:
26
This paper estimates potential output and the sources of growth in Chile during 1970-96. Actual output is cointegrated with the quality-adjusted measures of capital and labor, and constant returns to scale cannot be rejected. The estimates of potential output show a positive output gap in the years when the Chilean economy was deemed to be overheated. In 1986-90, the quality-adjusted labor variable explains close to 60 percent of the growth rate of GDP, while during 1991-95 capital formation plays a dominant role. The contribution of TFP growth in Chile is relatively small, but, based on a comparison with European and East Asian experiences, it is expected to increase in the medium term.
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