Abstract

BASILIO, Eufemia. Pro-Cyclical Fiscal Policy and Monetary Stability in Brazil, Chile, Colombia, Mexico, and Peru. Prob. Des [online]. 2018, vol.49, n.192, pp.139-167. ISSN 0301-7036.

This paper analyzes the relationship between the financial instability generated by short-term capital flows in the absence of control mechanisms and the restrictions facing the implementation of counter-cyclical fiscal policies in the inflation-targeting regime, using as a springboard the recent financial crises in, specifically, Brazil, Chile, Colombia, Mexico, and Peru, showing how an increase in the issuance of public bonds to, via interventions in the exchange rate market, sterilize the effects of short-term capital flows on the monetary base is a source of endogenous instability, because this mechanism entails risks for the exchange rate and interest rate.

Keywords : Fiscal and monetary policy; capital flows; fiscal consolidation; public debt; inflation targeting.

        · abstract in Spanish | French | Portuguese | Chinese     · text in English | Spanish     · English ( pdf ) | Spanish ( pdf )