Fighting Past Economic Wars: Crisis and Austerity in Latin America

Stephen Kaplan

Working Papers from The George Washington University, Institute for International Economic Policy

Abstract: Political economy theory expects that changes in macroeconomic governance are often catalyzed by institutional factors, such as partisanship or elections. I challenge and contextualize this view by incorporating the role of technocratic advisors into a domestic policymaking framework. I contend that structural and elite-level explanations are also important to understanding ideational shifts, particularly in regions like Latin America that suffer from severe economic volatility. Presidents tend to govern from the lens of their crisis past, appointing economic hawks (or mainstream economists) who embrace austerity in the shadow of inflation crises, and economic doves (heterodox economists) who drift from budget discipline following unemployment shocks. Employing an originally constructed data index, the Index of Economic Advisors, I conduct a statistical test of 16 Latin American countries from 1960 to 2011, finding support for sustained idological shifts in technocratic composition and fiscal governance, based on the nature of past shocks.

Keywords: Economic Crises; Austerity; Latin America; Technocrats; Inflation; Unemployment; Heterodox; Fiscal Policy; Political Economy; Macroeconomic Policy; Development (search for similar items in EconPapers)
JEL-codes: B22 E31 E60 E62 E65 H30 H60 N16 O54 O57 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2016-09
New Economics Papers: this item is included in nep-his, nep-hme, nep-lam, nep-mac, nep-pke and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:gwi:wpaper:2015-13

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