overtaking money supply to fund public expenses. recently, many emerging markets reduced the fiscal stimulus as economic growth became more stable and resilient. definitely, what i call a “ crowding - in ” process. several countries in latin - america evolved towards the recreation of budgetary institutions to encourage inter - temporal fiscal responsibility. latinamerican governments have made notable efforts in the fiscal area to improve debt levels and management as a mean to reduce vulnerability, with significant progress in recent years. pablo guidotti also showed this yesterday. as a result, financing needs are not an issue as it was in the past, even though shallow capital markets all over the region act as a constraint for sustainable growth over the long term. in fact, financial development is key – and will be even more so in our agenda. the depth of the financial system and its integration with international capital markets has a powerful disciplinary effect as it reduces incentives to follow expansionary policies as foreign capital flow out to other markets with more predictable returns. on the liability side, important progress has also been made in the region. the public debt to gdp ratio decreased almost 30 percentage points over the last five years. this reflects, in part, better liability management, which also shows up in the enormous reduction in the exposure to foreign currency debt. the region is finally leaving behind the well - known original sin that features last decades ( currency mismatches ), providing solid grounds for developing domestic yield curve in local currency. all over latin america, financial systems are better - matched, well capitalized and less exposed to public sector debt, another sin from the past. not long ago, we used to have not only central banks but also the financial system financing the treasury with no limits whatsoever. in the case of argentina, for instance, the policy designed by the central bank aimed to this purpose led banks to reduce their government debt holdings that recently stands at 14. 6 % of net assets, the lowest level in many years. in my view, good economic analysis also imply not to bundle latin american countries as they follow very different patterns and are at different stages in their paths towards long - term sustainability. hasty diagnosis and simplistic comparisons among the various countries ’ situations may lead to inappropriate policy recommendations. to sum up, we have been through a period of better macroeconomic management all across the world. we are witnessing the most turbulent times for the world economy in decades. as i referred to early last year, when were heading towards a more volatile

no long - run effect on the growth rate. the exception is the fact that they may increase private sector ’ s yields and, in that case, public investment could have positive effects on growth. this ultimately can be seen as an improvement in productivity, and might help to understand why the fiscal policy effect on growth seems to be underestimated, as daniel cohen pointed out on his exposition. but, as we are aware, models are set for very limited environments and the real world is extremely complicated. santiso made this point clearly. i am not saying that we must forget about theory. instead, i am suggesting that, in very dynamic economies, we, policy makers, should relay as much on models as we do on good judgment. the world is not linear, we have many discontinuities in the form of shocks from many different sources. it would be too much to ask a model to be able to account for these regular irregularities and, further, to be able to extract sound policy advice from it. another relevant issue on fiscal policy relates to the appropriate moment for implementation, especially with regard to its implications for stability. in this respect, we need to identify better ways to put together long - run objectives with short - run ones. in the later case, we are more prone to recognize its role as a stabilizing force. however, the ability of fiscal policy on reducing the volatility of the economic cycle is under deep scrutiny, especially in the developed world. probably this has to do with the usual handing over of the stabilizing role to monetary policy. also, the budgetary process seems to be too rigid to be able to respond in a timely way. in developing economies, usually more exposed to external shocks that hinder long - run fiscal sustainability, the implementation of countercyclical policies seems to be more difficult. notwithstanding, there is mounting evidence on the relevance of fiscal policy as a stabilizing economic force. as we are witnessing today, when there are dual mandates and divergent paths, we, central bankers, are confronted with an extremely challenging task that calls for coordination with other economic policy instruments, that gives more room for fiscal action. as an answer to the budgetary rigidities, there is a growing case for fiscal rules. many countries are putting in place this kind of framework as an institutional device to preserve the countercyclical role of fiscal policy. we heard relevant experiences such the uk and chile, showing the applicability to both