Debt Reduction in Latin America and the Caribbean

Andrew Powell and Ugo Panizza

No 13290, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: During the pandemic, public debt in Latin America and the Caribbean rose to more than 70 percent of GDP, and countries are now attempting to lower debt ratios. We analyze past debt reduction episodes and find inflation and the real interest rate were the most frequent main drivers, while higher growth, fiscal consolidation and debt restructuring were relatively rare. Interestingly, inflation episodes tended to be with independent central banks and low real interest rates, highlighting the value of monetary credibility. We find debt reduction is not associated with a rise in inequality nor in unemployment, and growth or fiscal consolidation may improve these indicators.

Keywords: Debt; Fiscal policy; Inflation; Debt restructuring (search for similar items in EconPapers)
JEL-codes: E62 F34 H63 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-fdg, nep-lam and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:13290

DOI: 10.18235/0005339

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