Research / BFI Working PaperOct 08, 2018

The Monetary and Fiscal History of Paraguay, 1960-2016

Javier Charotti, Carlos Fernández Valdovinos, Felipe Gonzalez Soley

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.