Braun Ll, J., & Braun Ll, M. (1999). Crecimiento potencial: el caso de Chile.

1 de abril del 1999

Braun Ll, J., & Braun Ll, M. (1999). Crecimiento potencial: el caso de Chile. Cuadernos de Economía, 479-517.

 

Abstract

This paper presents an endogenous growth model which explicitly incorporates international capital mobility. Production depends on both physical and human capital. We work out the transition to the equilibrium ratio of human to physical capital when there is a deficit of the latter. We argue that this model represents the relevant economic forces for a typical developing country that
has gone through structural changes towards better economic policies. The role of human capital relative abundance for subsequent growth and real exchange rate appreciation is emphasized. We argue that the real exchange rate is nothing but the relative price of human capital. The model predicts high and declining output growth rates, current account deficits, local interest rates and real exchange rates. The model is carefully calibrated for the Chilean economy. For the next ten years we predict an average growth potential of 6.4%, an average investment rate of 28%, an average current account deficit of 3.4% of GDP and a 36% real appreciation for the whole period.