Policies to reduce instability

Abstract

The current stabilization policy adopted by many Latin American countries demands a restrictive monetary policy coupled with a conservative fiscal policy. While these policies have been adapted to suture financial fragilities, they have not been able to significantly improve the levels of structural poverty and unemployment, rendering the approach vulnerable to political risk. By exploring the case of Argentina, this paper argues that the presence of such risk forces the government to adopt a heterodox, eclectic and very flexible approach to policy formation that may maximize its chances to achieve long term social objectives.