The Impact of the Great Recession and Policy Responses in Latin America: Was This Time Different?

Abstract

The 2007-8 international financial crisis and the 'Great Recession' (GR) affected the different regions of the world, including emerging economies. In the case of most major economies of Latin America, the reduction of public external debt, the previous policy of international reserves accumulation and the reduction and improvement in the composition of public debt provided some policy space for countercyclical policies. Consequently, governments could make use of countercyclical fiscal policy to face to effects of the IFC and GR, when in other occasions they made use of tightened policies. The countries' reaction to the crisis has varied with the use of different tools of economic policy. For instance, between 2011 and 2013, despite the countercyclical policies, the economic growth showed great volatility in the economies of the Region. In addition, there are a lot of concerns about the future performance of the economies of the Region due mainly to the uncertainties related to the global economy.