ABSTRACT
In the previous chapter the effects of fiscal and monetary policy in the context of the economies of Latin America were explained. In general, the goal of macroeconomic policy is to obtain a level of real GDP consistent with potential real GDP and a stable price level. Even for a developed country this is not an easy task. Until recently, macroeconomic outcomes in Latin America were rarely even close to this ideal outcome. In the region, unemployment and underemployment have been persistent problems. As we saw in the previous chapter, controlling inflation has been particularly difficult. In the main, these problems are the result of the structure of the economies of the region and poor policy choices. By the late 1970s, a combination of factors made the continuation of the policies of the post-war era increasingly unsustainable. This led to a painful and protracted period of macroeconomic stabilization. By this we mean the process of introducing macroeconomic policies that would reduce inflation and other economic imbalances, and provide the basis for more sustainable growth in the region.
