This project is the result of three shocks. The first one was in 1998 when the Inter-American Development Bank decided to fund a series of simultaneous studies on public debt for several Latin American countries under their “Red de Centros” research program. The study of Argentina was done by Paco Buera and Juanpa Nicolini, both at the Universidad Di Tella at the time. Their interest in the subject largely transcended the scope of the role of public debt as defined in that project, which was mostly descriptive. Their working paper became a first rough attempt to understand the macroeconomic history of Argentina as driven by the fiscal policies the country adopted in the last few decades, at a time when Argentina was already visibly walking toward one of the worst economic crises in its history.
The second shock was in 2006. Juanpa Nicolini was invited to discuss a paper by Tom Sargent, Noah Williams, and Tao Zha, in which they estimated a learning model to study several hyperinflations in Latin America during the 1980s. In the paper, the authors chose to estimate the model using only price-level data for each country, disregarding data on monetary aggregates even though the additional data would have provided additional precision in the estimation. The main reason for that approach, the authors argued, was the lack of consistent, good-quality data for monetary aggregates. Out of those discussions with Tom, an idea was born: to make an effort to build a consistent data set for a few Latin American countries, using a common theory that could be used to understand the multiple macroeconomic crises that plagued the region for decades.
The third shock occurred in 2009 during lunch at the Minneapolis Fed, where Juanpa mentioned the vague ideas discussed with Tom a few years before. His comments immediately caught the attention of Tim Kehoe, given his ever-present interest in Latin America and his experience as editor—together with Ed Prescott—of a book on great depressions of the twentieth century, published by the Federal Reserve Bank of Minneapolis.
Soon enough, the idea to host a conference at the Minneapolis Fed and discuss the history of several Latin American countries took shape, and Kei-Mu Yi, then Research Director, immediately supported it.
The conference took place in August 2010 and included the existing working paper for Argentina, plus drafts for Bolivia, Brazil, Ecuador, Mexico, Peru, and Venezuela. Tim got his hands dirty doing monetary policy analysis working with Carlos Gustavo Machicado in writing the first draft of the Bolivia paper.
In our view, the conference was a success. We were able to interest highly qualified economists to act as discussants, and the presentations and discussions generated lively and fruitful debates. Nevertheless, there was still much work to do. Most of the countries had major data problems, and, more importantly, we had not managed to converge to a common conceptual framework. The conference was closer to a sequence of papers rather than the systematic application of a common set of ideas to all the countries.
It became clear to us that we needed to strengthen the theory and make sure that every case study applied it in the same way. On the other hand, we also needed to allow for enough flexibility so as to acknowledge episodes in which the data could not be explained by the theory. After a first pass, we borrowed from the macroeconomics literature and further specialized the theory in order to capture some of these apparently puzzling episodes. These multiple steps from theory to data and back to theory would take time, which we had, and money, which we did not.
Our search for funding was quickly over when we got in touch with Lars Peter Hansen who at the time was the Director of the Becker Friedman Institute (BFI) at the University of Chicago. The generosity and encouragement shown by Lars were his two most important contributions, and patience was a close third. Finishing the project took us at least twice the time we estimated initially, mostly because the iteration between sharpening the conceptual framework and applying it to the eleven countries became more interesting over time. At each iteration, our ambition would only grow. Soon enough, our relationship with the BFI started, and Fernando Alvarez joined efforts with Lars in helping us shape the project to its final form.
As part of that iteration, we organized a second conference, this time in Chicago, in April of 2014. At that time, we were able to incorporate a new country to the list: Chile. After that conference, we decided to organize one-day workshops in each of the participating countries. At each workshop, the case study for each country would be presented to an audience of local economists, academics, and former policymakers, who would act as discussants. We ran the first workshop at Universidad Di Tella in Buenos Aires in August 2015. Later that same year, we organized the workshops at the Universidad Católica Boliviana in La Paz, the Central Bank of Chile in Santiago, and the Pontifícia Universidade Católica in Rio de Janeiro.
In October 2015, we also held a conference in Barcelona, hosted by MOVE, the Universitat Autònoma de Barcelona, and the Barcelona GSE, where we reviewed some of the country cases that needed more work and added three new countries: Colombia, Paraguay, and Uruguay.
During 2016, we organized the workshops at the Universidad Católica del Peru in Lima, the Banco de la República in Bogota, the Central Bank of Uruguay in Montevideo, and the Central Bank of Paraguay in Asunción. Finally, during 2017, we organized the workshops at ITAM in Mexico, at Universidad de las Americas in Quito, and at the BFI in Chicago to discuss the case of Venezuela.
After a new round of revisions, we held a three-day conference during which all the cases were presented and discussed at the BFI in Chicago, in December of 2017. Three final conferences were held in 2018, at the Banco de México in June, at the Central Bank of Chile in August, and at the Inter-American Development Bank in September, to complete a final revision of some of the cases and to discuss the main lessons of the project.
In the last three years of the project, Carlos Esquivel provided outstanding research assistance to the point of becoming coauthor of the final chapter in this book. Funding for Carlos’s efforts was generously provided by the Heller-Hurwicz Economics Institute at the University of Minnesota.
The Becker Friedman Institute for Economics (BFI) at the University of Chicago provided both funding and behind the scenes staff support for many of the conferences that held to support this venture. Initially, the BFI staff support was overseen by Suzanne Riggle and later Sam Ori, with the important direct staff inputs by Amy Lee Boonstra, and more recently, by Diana Petrova. In the latter stages of this project, Diana worked with the individual contributors of the various components of this volume to shepherd this project to completion and to make its contributions accessible to a broader community of scholars and central bank researchers. Joan Gieseke provided invaluable help editing all the chapters. Carlos Esquivel, University of Minnesota, provided extensive support in generating the graphs and figures associated with the chapters and related discussions, as well as converting the material into the appropriate formats. Karen Anderson, BFI’s Senior Director of Policy, Communications, & External Affairs, played a key role in overseeing the launch of the Monetary and Fiscal History of Latin America project website in 2018 along with Diana Petrova and Eric Hernandez, Senior Digital Media Manager, who worked on the content migration for this online repository to serve as a historical account of this multi-year project.
Finally, Tim Kehoe would like to thank his wife, Jeani, and Juanpa Nicolini would like to thank his wife, Anabella, for their encouragement and support.
We would also like to thank the discussants and organizers of all the conferences and local workshops:
For their participation in the Minneapolis conference of 2010, we thank Narayana Kocherlakota, Rodolfo Manuelli, Kjetil Storesletten, Lee Ohanian, Cristina Arellano, Harold Cole, Fabrizio Perri, and Luis Jácome.
For their participation in the Chicago conference of 2014, we thank Manuel Amador, Fernando Alvarez, Rodolfo Manuelli, Andrew Powell, Gerardo Della Paolera, Nancy Stokey, and Veronica Guerrieri.
For their participation in the Barcelona conference of 2015, we thank Albert Marcet, Fernando Broner, Roberto Chang, Alberto Martin, and Omar Licandro.
For their participation in the Chicago conference of 2017, we thank Marco Bassetto, Randy Kroszner, Manuel Amador, Enrique Mendoza, Rodolfo Manuelli, Saki Bigio, Mark Aguiar, José De Gregorio, Pedro Videla, Fabrizio Perri, Luigi Bocola, Andrew Powell, Ariel Burstein, Andy Neumeyer, Ricardo López Murphy, Marcelo Veracierto, Paulina Restrepo-Echavarria, Fernando Alvarez, Cristina Arellano, and François Velde.
For their participation in the Chile conference of 2018, we thank Joaquín Vial, Álvaro Saieh, Fernando Alvarez, Andy Neumeyer, José Scheinkman, Arnold Harberger, Andrés Velasco, Sara Calvo, Carlos Végh, and Guillermo Calvo.
For their participation in the Inter-American Development Bank conference of 2018, we thank Alejandro Izquierdo, Andrew Powell, Alejandro Werner, Joaquim Levy, Teresa Ter-Minassian, Carmen Reinhart, Miguel Castilla, Adrian Armas, Eduardo Fernández-Arias, Carlos Végh, Eduardo Borensztein, Arturo Galindo, Leandro Gastón Andrian, Jorge Roldos, and Sebastián Edwards.
For their participation in the local workshop in Argentina, 2015, we thank Andy Neumeyer, Roberto Cortés Conde, Pablo Gerchunoff, Roque Fernández, José Luis Machinea, Mario Vicens, Pablo Guidotti, Daniel Artana, José María Fanelli, Gerardo Della Paolera, Domingo Cavallo, Carlos Alfredo Rodríguez, and Alieto Guadagni.
For their participation in the local workshop in Bolivia, 2015, we thank Gonzalo Chávez, Oscar Vega, Rolando Morales, Horst Grebe, Ivan Finot, Juan Antonio Morales, Juan Carlos Requena, Luis Carlos Jemio, Flavio Machicado, Armando Pinell, Fernando Candia, and Ramiro Cavero.
For their participation in the local workshop in Brazil, 2015, we thank Marcelo Abreu, Affonso Pastore, Claudio Jaloretto, Edmar Bacha, Gustavo Franco, Murilo Portugal, Alfonso Bevilaqua, Eduardo Loyo, Amaury Bier, Rogério Werneck, Pedro Malan, Pérsio Arida, and Tiago Berriel.
For their participation in the local workshop in Chile, 2015, we thank Rodrigo Vergara, Roberto Álvarez, Daniel Tapia de la Puente, Manuel Agosin, Raimundo Soto, Gabriel Palma, Rolf Lüders, Patricio Meller, and Felipe Morandé.
For their participation in the local workshop in Colombia, 2016, we thank Hernando Vargas, Daniel Osorio-Rodríguez, Fabio Sánchez, Hernán Rincón, Mauricio Avella Gómez, Roberto Junguito, Rudolf Hommes, Juan José Echavarria, Guillermo Perry, Miguel Urrutia, and Andrés Álvarez.
For their participation in the local workshop in Paraguay, 2016, we thank Carlos Rodríguez Báez, Alberto Cáceres Ferreira, José Cantero, Ovidio Otazú, Carlos Knapps, Reinaldo Penner, Blas Chamorro, Marcos Lezcano Bernal, Marciano Charotti, Roland Holst, Carlos Carvallo, Hugo Eligio Caballero, Aníbal Insfrán, Jorge Schreiner, Raúl Vera, Dionisio Coronel, Gabriel González, Álvaro Caballero Carrizosa, Hermes Gómez Ginard, Santiago Peña, Manuel Ferreira, Miguel Mora, César Barreto, Ernst Bergen, Alberto Acosta Garbarino, Jorge Corvalán, and José Molinas.
For their participation in the local workshop in Peru, 2016, we thank José Rodríguez, Efraín Gonzales de Olarte, Gonzalo Llosa, Bruno Seminario, Oscar Dancourt, Renzo Rossini, and Waldo Mendoza.
For their participation in the local workshop in Uruguay, 2016, we thank Julio de Brun, Ariel Davrieux, Carlos Sténeri, Alejandro Vegh Villegas, Isaac Alfie, Alberto Bensión, Javier de Haedo, Luis Mosca, Mario Bergara, Andrés Masoller, Azucena Arbeleche, Fernando Barrán, and Pablo Rosselli.
For their participation in the local workshop in Ecuador, 2017, we thank Javier Díaz Cassou, Pablo Lucio Paredes, Jorge Gallardo, Joaquín Morillo, Vicente Albornoz, Jaime Morillo, Abelardo Pachano, Francisco Swett, Magdalena Barreiro, Pablo Better, Miguel Dávila, Augusto De La Torre, and Rodrigo Espinosa Bermeo.
For their participation in the local workshop in Mexico, 2017, we thank Diego Alejandro Domínguez Larrea, Enrique Cárdenas Sánchez, Ignacio Trigueros Legarreta, Germán Rojas Arredondo, Alejandro Hernández Delgado, Jesús Marcos Yacamán, Jaime Serra Puche, Manuel Sánchez González, Francisco Gil Díaz, and Manuel Ramos Francia.
For their participation in the local workshop to discuss Venezuela in Chicago, 2017, we thank Pedro Palma, Pablo Druck, Ramón Espinasa, Manuel Toledo, Omar Bello, Felipe Pérez, and José Pineda.
Finally, the Becker Friedman Institute would like to acknowledge the generous financial support we received throughout the years from Edward R. Allen, AM’85, PhD’92 and Donald R. Wilson Jr., AB’88, for this project, which ultimately led to the publication of this book and furthered research on fiscal studies more generally. BFI could not have possibly published this volume summarizing the important contributions made during this multi-year project without their generous contributions.
We would also like to thank in advance the exceptional young scholars who will take on this important body of work in the future and use it as a resource to continue exploring the important fiscal and monetary interactions in Latin America, Central America, and the world. We are also immensely thankful to the University of Minnesota Press for taking on the publication of this project and bringing this book volume to fruition.