Southern Cone Stabilization Plans

Abstract

This paper deals with stabilization plans whose costs raise the question as to whether the remedy is worse than the disease, or what may be named the Southern Cone case, after the experience of countries located at the bottom of South America.At the outset, however, it should be noticed that not all stabilization plans are accompanied by sharp falls in output and massive income redistributions.And not all such benign stabilizations occur in Asia or Africa; within Latin America there are also examples of relatively small short-term costs of stabilization followed by rapid growth.Colombia in 1967 is one such 1/ case, but there are more.-The first section of the paper will outline the initial conditions and the historical background to Southern Cone stabilization plans.The typical package of policy measures will also be discussed briefly.The second section will describe a stylized scorecard of the consequences of the plans.The third section will discuss some fresh complications introduced into stabilization plans by the high degree of international capital mobility observed in the late J.970s.Normative sections will close the paper, covering both the national and international dimensions of the Southern Cone case.The topic at hand is controversial.In its purely economic dimension it deals with an area, short~run macroeconomics, which during the late 1970s was unsettled.Debate in the industrialized countries echoes ...