Working Paper: NBER ID: w26318
Authors: William Easterly
Abstract: The lack of growth response to “Washington Consensus” policy reforms in the 1980s and 1990s led to widespread doubts about the value of such reforms. This paper updates these stylized facts by analyzing moderate to extreme levels of inflation, black market premiums, currency overvaluation, negative real interest rates and abnormally low trade shares to GDP. It finds three new stylized facts: (1) policy outcomes worldwide have improved a lot since the 1990s, (2) improvements in policy outcomes and improvements in growth across countries are correlated with each other (3) growth has been good after reform in Africa and Latin America, in contrast to the “lost decades” of the 80s and 90s. This paper makes no claims about causality. However, if the old stylized facts on disappointing growth accompanying reforms led to doubts about economic reforms, new stylized facts should lead to some positive updating of such beliefs.
Keywords: No keywords provided
JEL Codes: O1; O4; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| improvements in policy outcomes since the 1990s (F68) | growth improvements across countries (O57) |
| growth has improved in Africa and Latin America after reform (O54) | stagnation observed during the 1980s and 1990s (P27) |
| policy improvements (D78) | growth recovery (O41) |
| growth influences policy (F68) | improvements in policy outcomes (D78) |
| third factor (F29) | policy improvements and growth improvements (O29) |