Abundant evidence has linked fiscal discipline, low inflation, and a stable macroeconomic policy environment to stronger, longer-term growth in both emerging and advanced economies.6 In particular, many emerging market economies in the 1990s emulated the success of the advanced economies in the 1980s in controlling inflation.
Over the years, the emerging market economies have also improved their fiscal management to the point that their fiscal positions are now often more favorable than those of some advanced economies. Improvements in macroeconomic management have been particularly striking in Latin America, where large budget deficits and high inflation rates had produced costly swings in economic activity in previous decades.