Economic Policy Reform in Brazil and Turkey

At the turn of the century, the economies of both Brazil and Turkey encountered very serious difficulties; both countries resorted to IMF adjustment programs. The problems that were encountered, and the policy measures taken to address them, are analyzed. Thereafter, the lessons from the two crises are set forth. First, tighter fiscal and monetary policy may in fact be followed by more rapid economic growth. Second, even when the situation is dire, appropriate economic policy reforms can fundamentally alter the economic prospects of an economy. But, third, economic policy reforms are crucial to alter significantly the trajectory of an economy caught in a downward spiral of rising inflation, slowing growth, increasing pressure on the exchange rate, and rising spreads on outstanding government debt.