Crisis Response in Latin America: Is the "Rainy Day" at Hand?

Eduardo Fernandez-Arias and Peter Montiel

No 4628, Research Department Publications from Inter-American Development Bank, Research Department

Abstract: This paper examines the countercyclical policy options available to Latin American countries in the face of the current global economic crisis, concluding that most of the major countries in the region appear to possess the fiscal space (as measured by credible fiscal sustainability and debt headroom) to run prudent countercyclical fiscal deficits. Those countries should undertake a constrained fiscal expansion focused on productive public spending and financed by “rainy day” funds—large stocks of foreign exchange reserves that they have accumulated during recent years—rather than by market borrowing. The recent surge in multilateral financial activity to alleviate market illiquidity, whether intended for reserve or budget support, strengthens the case for this policy prescription: with multilateral support, the appropriate policy response is more expansionary, and its financing is less reliant on market borrowing.

Keywords: countercyclical policy; fiscal space; international reserves; multilateral financial support (search for similar items in EconPapers)
JEL-codes: E62 E63 F34 (search for similar items in EconPapers)
Date: 2009-06
New Economics Papers: this item is included in nep-cba, nep-dev, nep-lam and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.iadb.org/research/pub_hits.cfm?pub_id=W ... e_name=pubWP-686.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.iadb.org/research/pub_hits.cfm?pub_id=WP-686&pub_file_name=pubWP-686.pdf [301 Moved Permanently]--> https://www.iadb.org/research/pub_hits.cfm?pub_id=WP-686&pub_file_name=pubWP-686.pdf)

Related works:
Working Paper: Crisis Response in Latin America: Is the "Rainy Day" at Hand? (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:idb:wpaper:4628

Access Statistics for this paper

More papers in Research Department Publications from Inter-American Development Bank, Research Department Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library ().