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Policies to reduce instability

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  • Luis F. Brunstein

Abstract

The current stabilization policy adopted by many Latin Americancountries demands a restrictive monetary policy coupled with aconservative fiscal policy. While these policies have been adapted to suturefinancial fragilities, they have not been able to significantly improve thelevels of structural poverty and unemployment, rendering the approachvulnerable to political risk. By exploring the case of Argentina, this paperargues that the presence of such risk forces the government to adopt aheterodox, eclectic and very flexible approach to policy formation thatmay maximize its chances to achieve long term social objectives. La actual política de estabilización adoptada por muchos paíseslatinoamericanos exige una política monetaria restrictiva aunada a unapolítica fiscal conservadora. Aunque estas políticas han sido adaptadaspara aliviar fragilidades financieras, no han sido capaces de mejorarsignificativamente los niveles de pobreza y desempleo estructurales, locual hace que el enfoque sea vulnerable a riesgos políticos. Mediante elestudio del caso de Argentina, este trabajo argumenta que la presenciade estos riesgos obliga al gobierno a adoptar un heterodoxo, ecléctico ymuy flexible sistema de formulación de políticas que puede maximizarsus posibilidades de lograr objetivos sociales de largo plazo.

Suggested Citation

  • Luis F. Brunstein, 2008. "Policies to reduce instability," Revista de Economía del Caribe 7100, Universidad del Norte.
    • Handle: RePEc:col:000382:007100
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    File URL: http://rcientificas.uninorte.edu.co/index.php/economia/article/viewFile/544/896
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    More about this item

    Keywords

    Financial instability; contagion; monetary and fiscalpolicy; political risk; heterodox policy formation.Inestabilidad financiera; contagio; política monetariay fiscal; riesgo político; formulación heterodoxa de políticas.;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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