Establishing credibility
Subtitle: the role of foreign advisors
By: Sebastian Edwards.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11429; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11429.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Economic stabilization -- Chile.; Inflation (Finance) -- Chile.; Consultants -- Chile.; Chile -- Economic policy.; Chile -- Economic conditions -- 1918-1970.
Description: "In this paper I analyze the role of foreign advisors in stabilization programs.  I discuss from an analytical perspective why foreigners may help a developing country's government put in place a successful stabilization program.  This framework is used to analyze Chile's experience with anti-inflationary policies in the mid 1950s.  In 1955-58 Chile implemented a stabilization package with the advice of the U.S.  consulting firm of Klein-Saks.  The Klein-Saks program took place in a period of acute political confrontation.  After what was considered to be an initial success -- inflation declined from 85% in 1955 to 17% in 1957 -- the program failed to achieve durable price stability.  I argue that the foreign advisors of the Klein-Saks Mission gave initial credibility to the stabilization program launched in 1955.  But providing initial credibility was not enough to ensure success.  Congress failed to act decisively on the fiscal front.  Consequently the fiscal imbalances that had plagued Chile for a long time were reduced, but not eliminated.  I present empirical results on the evolution of inflation, exchange rates and interest rates that support my historical analysis"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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