Working Paper: NBER ID: w25523
Authors: Timothy J. Kehoe; Carlos Gustavo Machicado; José Peres Cajas
Abstract: After the economic reforms that followed the National Revolution of the 1950s, Bolivia seemed positioned for sustained growth. Indeed, it achieved unprecedented growth from 1960 to 1977. The rapid accumulation of debt due to persistent deficits and a fixed exchange rate policy during the 1970s led to a debt crisis that began in 1977. From 1977 to 1986, Bolivia lost almost all the gains in GDP per capita that it had achieved since 1960. In 1986, Bolivia started to grow again, interrupted only by the financial crisis of 1998–2002, which was the result of a drop in the availability of external financing. Bolivia has grown since 2002, but government policies since 2006 are reminiscent of the policies of the 1970s that led to the debt crisis, in particular, the accumulation of external debt and the drop in international reserves due to a de facto fixed exchange rate since 2012.
Keywords: Bolivia; Economic History; Debt Crisis; Fiscal Policy; Monetary Policy
JEL Codes: E52; E63; H63; N16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| government policies during the 1970s (E65) | accumulation of external debt (F34) |
| accumulation of external debt (F34) | economic stability and growth (O23) |
| fixed exchange rate policy (F31) | debt crisis starting in 1977 (F34) |
| persistent fiscal deficits (H68) | debt crisis starting in 1977 (F34) |
| debt crisis starting in 1977 (F34) | significant loss in GDP per capita gains (F62) |
| government policies since 2006 (H59) | potential future crises (H12) |
| hyperinflation (E31) | negative implications on economic performance (F69) |
| high fiscal deficits (H68) | negative implications on economic performance (F69) |
| external debt management (H63) | negative implications on economic performance (F69) |
| economic reforms post-1950s (E69) | unprecedented GDP growth from 1960 to 1977 (O10) |
| government policies during the 1970s (E65) | economic outcomes (F61) |