 Crisis Response in Latin America: Is the "Rainy Day" at Hand?Eduardo Fernandez-Arias and Peter Montiel No 1652, IDB Publications (Working Papers) from Inter-American Development Bank 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 fundslarge stocks of foreign exchange reserves that they have accumulated during recent yearsrather 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: WP-686 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:1652 Access Statistics for this paper More papers in IDB Publications (Working Papers) from Inter-American Development Bank Contact information at EDIRC. |
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