Beyond Subordination. Towards Effective Coordination Between Fiscal and Monetary Policy

In a context of high global volatility, fiscal constraints, and growing social and climate challenges, coordination between fiscal and monetary policy has re-emerged as a central issue for Global South economies. This Latindadd report critically examines the evolution of this relationship, questioning the dominant approach that has subordinated fiscal policy to price stability objectives, and highlights the need to move towards more balanced frameworks that prioritise development, sustainability and social well-being.

Author: Jorge Luna

Descripción

The document analyses how, since the 1980s, central bank independence and the emphasis on inflation control have generated an asymmetric relationship between policies, limiting fiscal space. Building on this diagnosis, it explores the concepts of dominance and coordination, as well as the structural constraints faced by developing economies due to global monetary hierarchies. Finally, the report argues that effective coordination — based on shared objectives, communication and clear institutional frameworks — can help improve debt sustainability, strengthen local currency financing and expand the space for development-oriented policies.

Published on 13 April 2026