The Monetary and Fiscal History of Latin America

The Becker Friedman Institute (BFI) launched the Monetary and Fiscal History of Latin America Project in 2013 to examine the impact of past aggregate monetary and fiscal policies in eleven of the largest Latin American countries since 1960.

About the Project
The goal of this project is to better understand the causes of economic stagnation and decline in Latin America.

The Monetary and Fiscal History of Latin America Project was launched in 2013 to analyze economic data from the ten largest countries of South America plus Mexico, to produce a comprehensive monetary and fiscal history of the region. The papers use a common conceptual framework and a comparable data set to narrate the economic histories of these eleven Latin American countries since 1960. The authors are country experts who participated in numerous meetings over five years to discuss and receive feedback on their findings.

The working papers were released at an event co-hosted with the Central Bank of Chile on August 24, 2018 in Santiago, followed by an event co-hosted with the Inter-American Development Bank (IDB) on September 24-25, 2018 in Washington, DC.

The project was organized and managed by the University of Chicago’s Fernando Alvarez and Lars Peter Hansen, the University of Minnesota’s Timothy Kehoe, the Minneapolis Federal Reserve Bank’s Juan Pablo Nicolini, and New York University’s Thomas Sargent, also a Senior Fellow with UChicago’s Kenneth C. Griffin Department of Economics. These distinguished scholars will also summarize key findings from the collective country case studies to highlight the impacts of specific policy options. The findings of this project will offer lessons for future policy in Latin America and other regions of the world.


Learn more and buy the book, here.


In 2020, the MAFHOLA project launched a manifold version (e-book) of this entire volume.

Download the comprehensive database for the MAFHOLA Project. For a description of the data and sources, see the Qualitative Data files for each of the 11 countries below.

Working Papers

The papers use a common conceptual framework and a comparable data set to narrate the economic history of the 11 largest Latin American countries since 1960.
Working Paper
Francisco Buera, Sam B. Cook Professor of Economics, Department of Economics, Washington University
Juan Pablo Nicolini, Senior Research Economist, Federal Reserve Bank of Minneapolis

In this paper, we review the monetary and fiscal history of Argentina for the period 1960–2017, a time during which Argentina suffered several balance of payments crises, three hyperinflations, two defaults on government debt, and three banking crises. All told, between 1979 and 1991, after several monetary reforms, thirteen zeros had been removed from its currency. We argue that all these events are the symptom of a recurrent problem: Argentina’s unsuccessful attempts to tame the fiscal deficit. An implication of our analysis is that the future economic evolution of Argentina depends greatly on its ability to develop institutions that guarantee that the government does not spend more than its genuine tax revenues over reasonable periods of time.

Working Paper
Timothy J. Kehoe, Distinguished McKnight University Professor of Economics, University of Minnesota
Carlos Gustavo Machicado, Senior Researcher, Institute for Advanced Development Studies, Bolivia
José Peres Cajías, Professor, Economic History Department, University of Barcelona

After the economic reforms that followed the National Revolution of the 1950s, Bolivia seemed positioned for sustained growth. Indeed, it achieved unprecedented growth during 1960–1977. Mistakes in economic policies, especially the rapid accumulation of debt and a fixed exchange rate policy during the 1970s, led to a debt crisis that began in 1977. From 1977 to 1986, Bolivia lost almost all the gains in GDP per capita that it had achieved since 1960. In 1986, Bolivia started to grow again, interrupted only by the financial crisis of 1998–2002, which was the result of a drop in the availability of external financing. Bolivia has grown since 2002, but government policies since 2006 are reminiscent of the policies of the 1970s that led to the debt crisis, in particular, the accumulation of external debt and the drop in international reserves due to a fixed exchange rate.

Working Paper
Márcio Garcia, Associate Professor, PUC-Rio, CNPq and FAPERJ; Coordinator, Brazil Project
João Ayres, Research Economist, Inter-American Development Bank
Diogo Guillén, Global Head Economist, Itaú Asset Management
Patrick Kehoe, Consultant, Federal Reserve Bank of Minneapolis; Professor of Economics, Stanford University

Brazil had a long period of high inflation. It peaked around 100% per year in 1964, and accelerated again in the 1970s, reaching levels above 100% on average between 1980 and 1994. This last period coincided with severe balance of payments problems and economic stagnation that followed the external debt crisis in the early 1980s. We show that the high-inflation period (1960-1994) was characterized by a combination of deficits, passive monetary policy, and constraints to debt financing. The transition to the low-inflation period (1995-2016) was characterized by improvements in all those instances, but it did not lead to significant improvements in economic growth. In addition, we document a strong correlation between inflation rates and seigniorage revenues, but observing that the underlying inflation rates are too high for the modest levels of seigniorage revenues. Finally, we discuss the role of monetary passiveness and indexation in accounting for the unique features of the inflation dynamics in Brazil in comparison to the other Latin American countries.

Working Paper
Rodrigo Caputo, Research Associate, CESS, Oxford University-USACH
Diego Saravia, Manager of Economic Research, Research Department of the Central Bank of Chile;

Chile has experienced deep structural changes in the last fifty years. In the 1970s a massive increase in government spending, not financed by an increase in taxes or debt, induced high and unpredictable inflation. Price stability was achieved in the early 1980s, after a fixed exchange rate regime was adopted. This regime, however, generated a sharp real exchange rate appreciation that exacerbated the external imbalances of the economy. The regime was abandoned and nominal devaluations took place. This generated the collapse of the financial system that had to be rescued by the government. There was no debt default, but in order to service the public debt, the fiscal authority had to generate surpluses. Since 1990, this was a systematic policy followed by almost all administrations and helped achieve two different, but related, goals. It contributed to reducing the fiscal debt and enabled the Central Bank to pursue an independent monetary policy aimed at reducing inflation.

Working Paper
David Perez-Reyna, Assistant Professor, Department of Economics of Universidad de los Andes, Colombia
Daniel Osorio-Rodríguez, Junior Researcher, Monetary and International Investment Division, Banco de la Republica (the Central Bank of Colombia)

In this paper we characterize the joint history of monetary and fiscal policies in Colombia since 1960. We divide our analysis into three periods, which are differentiated by the finance structure of the fiscal deficit, the institutional framework of monetary and fiscal policies, and the levels of inflation: 1960-1970, when both inflation and the fiscal deficit were low on average; 1971-1990, when both inflation and the fiscal deficit increased; and 1991-2017, when despite the highest average fiscal deficit and the worst recession of the century, inflation kept a downward trend in the context of a newly independent Central Bank and increasingly flexible exchange markets. The first two periods were characterized by fiscal dominance, with larger fiscal deficits leading to increased inflation in the context of a nonindependent monetary policy. After 1991, the Constitution enshrined monetary dominance via an independent Central Bank. We observe that although large fiscal deficits, macroeconomic swings and monetary imbalances were rare in Colombia, average economic growth was comparable to other Latin American countries that experienced higher macroeconomic volatility.

Working Paper
Simón Cueva, Regional Academic Director, Laureate Latin America
Julían P. Díaz, Associate Professor, Quinlan School of Business, Loyola University Chicago

We document the main patterns in Ecuador’s fiscal and monetary policy during the 1950-2015 period, and conduct a government’s budget constraint accounting exercise to quantify the sources of deficit financing. We find that, prior to the oil boom of the 1970s, the size of the government and its financing needs were small, and the economy exhibited high growth rates and low inflation. The oil boom led to a massive increase in government spending. The oil prices crash of the early 1980s was not accompanied by any substantial fiscal correction, and the government considerably relied on seigniorage as a source of revenue. This coincided with almost three decades of high inflation rates and stagnant output. The dollarization regime, implemented in 2000, removed the ability of the government to resort to seigniorage to cover its imbalances. Indeed, in spite of large deficits registered since 2007, inflation has remained at historically low levels. However, the recent policies of inflated spending and the heavy borrowing needed to finance it remind those that led to the collapse of the economy during the 1980s and 1990s, and generate concerns regarding the long-term sustainability of the dollarization regime, and of the benefits it has provided.

Working Paper
Felipe Meza, Researcher, Centro de Analisis e Investigacion Economica (CAIE); Professor of Economics, Instituto Tecnologico Autonomo de Mexico (ITAM)

The objective of this paper is to analyze the monetary and fiscal history of Mexico using a model of the consolidated budget constraint of the Mexican government as the framework. I assume a small open economy in which the government exports oil. I study the period 1960-2016. I evaluate the ability of the model to explain the crises of 1982 and 1994, and while the model can explain the 1982 debt crisis, it cannot explain the 1994 crisis. A constitutional change in the relationship between the federal government and Banco de México, and policy choices made in the aftermath of the 1994 crisis, are consistent with a transition from fiscal dominance to an independent Central Bank. Inflation fell persistently after 1995, reaching values of 3% per year in mid-2016. That number is the target of the Central Bank. After a long transition following the 1982 crisis, Mexico succeeded in controlling inflation. I discuss forces that reduced inflation over time: a long sequence of primary surpluses, the constitutional change that gave independence and a goal to the Central Bank, and the current inflation targeting regime. On the fiscal side, I observe a change in the downward trend of the total debt-to-GDP ratio, as it fell from the 1980s to 2009, the year in which it started growing persistently until 2016.

Working Paper
Javier Charotti, Researcher, Central Bank of Paraguay
Carlos Fernández Valdovinos, President, Central Bank of Paraguay
Felipe Gonzalez Soley, Researcher, Central Bank of Paraguay

In this paper we analyze the monetary and fiscal history of Paraguay between 1960 and 2016. The analysis is divided into four periods: Golden years and large external shocks (1962-1980), Fiscal imbalances and nominal instability (1981-1990), Deregulation and financial crisis (1991-2003), and finally, the Period of structural reforms (2004-2016). We observe that the monetary and fiscal policy maintained a conservative stance relative to other Latin American countries with some episodes of fiscal or monetary imbalances. These were a consequence of different factors depending on the period of analysis, among which we can quote: reform of the legal framework of the Central Bank, stabilization plans, credit market, and structural reforms. Finally, compared to most countries in Latin America, Paraguay has not experienced large macroeconomic imbalances, but remains among the countries with the lowest income per capita levels.

Working Paper
Cesar Martinelli, Professor of Economics, George Mason University
Marco Vega, Deputy Manager of Economic Research, Economic Studies Depart., Central Reserve Bank of Peru; Professor, Pontificia Universidad Católica del Perú

We show that Peru’s chronic inflation through the 1970s and 1980s was a result of the need for inflationary taxation in a regime of fiscal dominance of monetary policy. Hyperinflation occurred when further debt accumulation became unavailable, and a populist administration engaged in a counterproductive policy of price controls and loose credit. We interpret the fiscal difficulties preceding the stabilization as a process of social learning to live within the realities of fiscal budget balance. The credibility of policy regime change in the 1990s may be linked ultimately to the change in public opinion, which gave proper incentives to politicians, after the traumatic consequences of the hyper stagflation of 1987- 1990.

Working Paper
Gabriel Oddone, Economic Historian, Universidad de la Republica, Uruguay
Joaquín Marandino, Researcher, Universidad Torcuato Di Tella, Argentina

This paper analyzes the monetary and fiscal history of Uruguay between 1960 and 2017. The aim is to explore the links between unfavorable fiscal and monetary policies, nominal instability, and macroeconomic performance. The 1960s is characterized by high inflation and sustained large deficits, and a large banking crisis in 1965. Since the mid-1970s, the government liberalized the economy and attempted to stop the money financing of deficits that prevailed in the previous decade. During the transition to a more open economy, Uruguay encountered two major crises in 1982 and 2002: the former was very costly in fiscal terms and brought back the monetization of deficits, while the latter had significantly lower effects on deficit and inflation. The evidence collected suggests governments have slowly understood the importance of fiscal constraints to guarantee nominal stability.

Working Paper
Diego Restuccia, Professor of Economics, University of Toronto; Research Associate, National Bureau of Economic Research (NBER)

I document the salient features of monetary and fiscal outcomes for the Venezuelan economy during the 1960 to 2016 period. Using the consolidated government budget accounting framework of Chapter 2, I assess the importance of fiscal balance, seigniorage, and growth in accounting for the evolution of debt ratios. I find that extraordinary transfers, mostly associated with unprofitable public enterprises, and not central government primary deficits, account for the increase in financing needs in recent decades. Seigniorage has been a consistent source of financing of deficits and transfers—especially in the last decade—with increases in debt ratios being important in some periods.

Working Paper No. 2019-46
Timothy J. Kehoe, Distinguished McKnight University Professor of Economics, University of Minnesota
Juan Pablo Nicolini, Senior Research Economist, Federal Reserve Bank of Minneapolis
Thomas J. Sargent

In this chapter, we develop a conceptual framework for analyzing the interactions between aggregate fiscal policy and monetary policy. The framework draws on existing models that analyze sovereign debt crises and balance‐of‐payments crises. We intend this framework as a guide for analyzing the monetary and fiscal history of a set of major Latin American countries from the 1960s until now.


Check out the latest videos from our events on The Monetary and Fiscal History of Latin America.
September 24, 2018
A Conversation with Arnold Harberger and Lars Peter Hansen
University of Chicago Professor Emeritus Arnold Harberger discusses the legacy of UChicago Economics with David Rockefeller Distinguished Professor Lars Peter Hansen during the Monetary and Fiscal History of Latin America conference in Santiago. Chile. Harberger reflects on his experience working in Latin America and current events that impact economic policy outcomes in the region. He also highlights the successes of his many past students as a hallmark of his career.
September 20, 2018
Some Real Exchange Rate Stories from Latin America, with Arnold Harberger
September 24, 2018
A Conversation with Arnold Harberger and Lars Peter Hansen
September 20, 2018
Some Real Exchange Rate Stories from Latin America, with Arnold Harberger


Presentations from Santiago Conference, August 23–24, 2018

Photos from Santiago Conference, AUGUST 23–24, 2018

Presentations from DC Conference, September 24–25, 2018


Conference 8:45 am Central Bank of Chile

Monetary and Fiscal History of Latin America Conference in Santiago

The Becker Friedman Institute’s Macro Finance Research Program (MFR) will release a unique set of papers on the Fiscal and Monetary History of Latin America during a high-level conference, jointly hosted by the Becker Friedman Institute and the Central Bank of Chile, on August 24, 2018, in Santiago.

The authors of select papers, along with notable economic leaders such as the University of Chicago’s Lars Peter Hansen, CorpGroup’s Alvaro Saieh, University of Chicago Professor Emeritus Arnold Harberger, NYU’s Thomas Sargent, the Minneapolis Federal Reserve’s Juan Pablo Nicolini, and others, will discuss the final papers during this groundbreaking event.

The full agenda and additional information can be found here.

Organizers / Guests
  • Fernando Alvarez
  • Guillermo Calvo
  • Sara Calvo
  • Márcio Garcia
  • Lars Peter Hansen
  • Arnold Harberger
  • Tim Kehoe
  • Andy Neumeyer
  • Juan Pablo Nicolini
  • Alvaro Saieh
  • Diego Saravia
  • José Scheinkman
  • Carlos Végh
  • Andres Velasco
  • Joaquín Vial
Conference 2:30 pm Inter-American Development Bank (IDB)

The Monetary and Fiscal History of Latin America Conference in Washington, DC

On September 24-25, 2018, the Research Department at the Inter-American Development Bank (IDB) and the Becker Friedman Institute’s Macro Finance Research Program (MFR) at the University of Chicago will co-host a conference on The Monetary and Fiscal History of Latin America in Washington, DC. The event will bring together notable economists from academic and policy institutions to discuss comprehensive comparative studies on the fiscal and monetary history of seven Latin American countries.

These studies are the result of a project sponsored by the Becker Friedman Institute and organized by Lars Peter Hansen (University of Chicago), Fernando Alvarez (University of Chicago), Timothy Kehoe (University of Minnesota), Juan Pablo Nicolini (Federal Reserve Bank of Minneapolis), and Thomas Sargent (New York University), in which country experts worked together to create a set of papers that narrate the economic history of eleven Latin American countries since 1960 using a common conceptual framework and comparable datasets. The main goal of this event will be to discuss the findings from this research, helping enhance our understanding of economic crises in these regions, and offer lessons for economies around the world.

The full agenda and additional information can be found here. 

For more information, please contact Diana Petrova at

Organizers / Guests
  • Fernando Alvarez
  • Adrian Armas
  • Joao Ayres
  • Eduardo Borensztein
  • Rodrigo Caputo
  • Miguel Castilla
  • Sebastian Edwards
  • Eduardo Fernandez-Arias
  • Arturo Galindo
  • Lars Peter Hansen
  • Alejandro Izquierdo
  • Joaquim Levy
  • Cesar Martinelli
  • Felipe Meza
  • Juan Pablo Nicolini
  • Gabriel Oddone
  • Andrew Powell
  • Carmen Reinhart
  • Marta Ruiz-Arranz
  • Teresa Ter-Minassian
  • Carlos Végh
  • Alejandro Werner



Reach out to us at