International Crises and Policy Responses in the Southern Cone
Liliana Castilleja Vargas,
Daniel Hernaiz and
No 4189, IDB Publications (Working Papers) from Inter-American Development Bank
This document analyzes the patterns of fiscal and monetary policy in five economies of the Latin American Southern Cone (Argentina, Brazil, Chile, Paraguay and Uruguay) during four episodes of international crises: 1994, 1997-1999, 2001 and 2008. In contrast with earlier episodes when most countries in the region applied procyclical fiscal and monetary policies, the response of the five countries to the 2008 crisis was countercyclical. On the fiscal side, countries had a larger fiscal space in 2008 to implement a countercyclical policy thanks to increases in primary balances, improvements in sustainability indicators and a reduction in financing needs in the years before the crisis. On the monetary side, the capacity to implement countercyclical policy was supported by a shift towards more flexible exchange rate regimes, and monetary policy regimes that enhanced transparency, reduced price volatility and increased the credibility of monetary authorities. For countries to be able to implement countercyclical responses in future crisis episodes, the fiscal authorities should reverse expansionary measures during good times and Central Banks should meet their inflation targets to preserve fiscal space and anchor inflation expectations.
Keywords: Cyclicality (search for similar items in EconPapers)
JEL-codes: E52 E62 F3 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://publications.iadb.org/publications/english ... he-Southern-Cone.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:4189
Access Statistics for this paper
More papers in IDB Publications (Working Papers) from Inter-American Development Bank Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library ().