Stabilization programs in chronic-inflation countries

Evidence from Latin America

Bibliographic Data

ID21695062
AuthorsGabriel Palazzo (0000-0003-1552-3835, University of Sussex, corresponding author), Martin Rapetti (0000-0003-3769-6278, Universidad de Buenos Aires), Joaquin Waldman (0009-0006-3588-8777, Consejo Nacional de Investigaciones Científicas y Técnicas)
Year2025
Volume53
Issue4
Pages407-441
Publication date2025-10-02
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueOxford Development Studies (JOURNAL)
Journal identifiersISSN: 1360-0818 • E-ISSN: 1469-9966
PublisherInforma UK Limited (PUBLISHER • GB)
DOI10.1080/13600818.2025.2544259
OpenAlexW4413313673
LanguageEN
References cited33

Chronic inflation has affected Latin America for decades, leading to many stabilization attempts. We develop a novel database with 46 stabilization/disinflation programs across 13 Latin American countries (1970–2020), classifying them as failures, temporary stabilizations, or lasting stabilizations. Our main findings are: 1) programs have failed very often; 2) the nominal exchange rate acts as a de facto anchor, decelerating faster than inflationand causing real exchange rate appreciation; 3) lasting stabilizations begin with stronger fiscal and balance of payments (BoP) positions; 4) lasting stabilizations are preceded by BoP and fiscal adjustments associated with GDP contractions; 5) lasting stabilizations keep fiscal accounts balanced for several years ; 6) stabilizations typically boost short-run growth; 7) the current account worsens during stabilizations; 8) temporary stabilizations are interrupted by currency depreciations; and 9) many stabilization experiences end in currency crises despite their success in ending chronic inflation

Developing country · Development economics · Economic growth · Economics · Latin Americans · Macroeconomics · Political science · Economic Theory and Policy · Global Financial Crisis and Policies · Monetary Policy and Economic Impact

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