Costa Rica: Mismanagement of the Coffee Boom
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Date
1991-06
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Ohio State University. Department of Agricultural, Environmental, and Development Economics
Abstract
This paper examines the macroeconomic consequences of the 1976-80 coffee boom in Costa Rica. It first describes the nature and measures the extent of this positive, temporary trade shock, associated both with coffee price increases and a major improvement of the country's international terms of trade. It next explores the consequences of the resulting windfall on the components of aggregate demand and supply, on asset accumulation, on unemployment, and on relative commodity prices. Finally, it evaluates macroeconomic policy management during the boom and the extent to which inappropriate policy decisions contributed to the fiscal and financial crisis of the early 1980. It also attempts to identify the impact of both the trade shock and the policy responses on the country's long-term prospects for economic growth.