The Road to Redemption: Policy Response to Crises in Latin America / Carlos A. Vegh, Guillermo Vuletin.

Format:

Book

Author/Creator:

Vegh, Carlos A.

Contributor:

National Bureau of Economic Research.

Vuletin, Guillermo.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20675.

NBER working paper series no. w20675

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Road to Redemption

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

This paper analyzes the fiscal and monetary policy responses to crises in Latin America over the last 40 years. We argue that, on average, Latin American countries have "graduated" in terms of their policy responses in the sense that they have been able to switch from procyclical to counteryclical policy responses. This average response, however, masks a great deal of heterogeneity with some countries (such as Chile, Brazil, and Mexico) leading the graduation process and others (like Argentina and Venezuela) still showing procyclical policy responses. We further show that countercyclical policy responses have been effective in reducing the duration and intensity of crises. Finally, we relate our analysis to the current crisis in the Eurozone and argue that, like in many instances in Latin America, procyclical fiscal policy has increased the duration and intensity of the crisis.

Notes:

Print version record

November 2014.