A Monetary and Fiscal History of Latin America, 1960–2017

A major, new, and comprehensive look at six decades of macroeconomic policies across the region What went wrong with the economic development of Latin America over the past half-century? Along with periods of poor economic performance, the region’s countries have been plagued by a wide variety of economic crises. This major new work brings together dozens of leading economists to explore the economic performance of the ten largest countries in South America and of Mexico. Together they advance the fundamental hypothesis that, despite different manifestations, these crises all have been the result of poorly designed or poorly implemented fiscal and monetary policies. Each country is treated in its own section of the book, with a lead chapter presenting a comprehensive database of the country’s fiscal, monetary, and economic data from 1960 to 2017. The chapters are drawn from one-day academic conferences—hosted in all but one case, in the focus country—with participants including noted economists and former leading policy makers. Cowritten with Nobel Prize winner Thomas J. Sargent, the editors’ introduction provides a conceptual framework for analyzing fiscal and monetary policy in countries around the world, particularly those less developed. A final chapter draws conclusions and suggests directions for further research. A vital resource for advanced undergraduate and graduate students of economics and for economic researchers and policy makers, A Monetary and Fiscal History of Latin America, 1960–2017 goes further than any book in stressing both the singularities and the similarities of the economic histories of Latin America’s largest countries. Contributors: Mark Aguiar, Princeton U; Fernando Alvarez, U of Chicago; Manuel Amador, U of Minnesota; Joao Ayres, Inter-American Development Bank; Saki Bigio, UCLA; Luigi Bocola, Stanford U; Francisco J. Buera, Washington U, St. Louis; Guillermo Calvo, Columbia U; Rodrigo Caputo, U of Santiago; Roberto Chang, Rutgers U; Carlos Javier Charotti, Central Bank of Paraguay; Simón Cueva, TNK Economics; Julián P. Díaz, Loyola U Chicago; Sebastian Edwards, UCLA; Carlos Esquivel, Rutgers U; Eduardo Fernández Arias, Peking U; Carlos Fernández Valdovinos (former Central Bank of Paraguay); Arturo José Galindo, Banco de la República, Colombia; Márcio Garcia, PUC-Rio; Felipe González Soley, U of Southampton; Diogo Guillen, PUC-Rio; Lars Peter Hansen, U of Chicago; Patrick Kehoe, Stanford U; Carlos Gustavo Machicado Salas, Bolivian Catholic U; Joaquín Marandino, U Torcuato Di Tella; Alberto Martin, U Pompeu Fabra; Cesar Martinelli, George Mason U; Felipe Meza, Instituto Tecnológico Autónomo de México; Pablo Andrés Neumeyer, U Torcuato Di Tella; Gabriel Oddone, U de la República; Daniel Osorio, Banco de la República; José Peres Cajías, U of Barcelona; David Perez-Reyna, U de los Andes; Fabrizio Perri, Minneapolis Fed; Andrew Powell, Inter-American Development Bank; Diego Restuccia, U of Toronto; Diego Saravia, U de los Andes; Thomas J. Sargent, New York U; José A. Scheinkman, Columbia U; Teresa Ter-Minassian (formerly IMF); Marco Vega, Pontificia U Católica del Perú; Carlos Végh, Johns Hopkins U; François R. Velde, Chicago Fed; Alejandro Werner, IMF. Contents 8 Foreword 12 Acknowledgments 14 Detecting Fiscal-Monetary Causes of Inflation 20 A Framework for Studying the Monetary and Fiscal History of Latin America 38 Argentina 62 The History of Argentina 64 Discussion of the History of Argentina 1 90 Discussion of the History of Argentina 2 94 Bolivia 100 The History of Bolivia 102 Discussion of the History of Bolivia 146 Brazil 150 The History of Brazil 152 Discussion of the History of Brazil 1 210 Discussion of the History of Brazil 2 214 Chile 216 The History of Chile 218 Discussion of the History of Chile 250 Colombia 260 The History of Colombia 262 Discussion of the History of Colombia 290 Ecuador 294 The History of Ecuador 296 Discussion of the History of Ecuador 334 Mexico 340 The History of Mexico 342 Discussion of the History of Mexico 374 Paraguay 378 The History of Paraguay 380 Discussion of the History of Paraguay 1 406 Discussion of the History of Paraguay 2 410 Peru 418 The History of Peru 420 Discussion of the History of Peru 1 454 Discussion of the History of Peru 2 462 Uruguay 468 The History of Uruguay 470 Discussion of the History of Uruguay 1 498 Discussion of the History of Uruguay 2 504 Venezuela 512 The History of Venezuela 514 Discussion of the History of Venezuela 1 544 Discussion of the History of Venezuela 2 548 Lessons from the Monetary and Fiscal History of Latin America 556 Contributors 586