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Fighting Past Economic Wars: Crisis and Austerity in Latin America

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  • Stephen Kaplan

Abstract

Political economy theory expects that changes in macroeconomic governance are often catalyzed by institutional factors, such as partisanship or elections. I challenge and contextualize this view by incorporating the role of technocratic advisors into a domestic policymaking framework. I contend that structural and elite-level explanations are also important to understanding ideational shifts, particularly in regions like Latin America that suffer from severe economic volatility. Presidents tend to govern from the lens of their crisis past, appointing economic hawks (or mainstream economists) who embrace austerity in the shadow of inflation crises, and economic doves (heterodox economists) who drift from budget discipline following unemployment shocks. Employing an originally constructed data index, the Index of Economic Advisors, I conduct a statistical test of 16 Latin American countries from 1960 to 2011, finding support for sustained idological shifts in technocratic composition and fiscal governance, based on the nature of past shocks.

Suggested Citation

  • Stephen Kaplan, 2016. "Fighting Past Economic Wars: Crisis and Austerity in Latin America," Working Papers 2015-13, The George Washington University, Institute for International Economic Policy.
    • Handle: RePEc:gwi:wpaper:2015-13
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    More about this item

    Keywords

    Economic Crises; Austerity; Latin America; Technocrats; Inflation; Unemployment; Heterodox; Fiscal Policy; Political Economy; Macroeconomic Policy; Development;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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