Recession In El Salvador

Recessions cause almost the same anarchy of a war, the constant battle against them by various governments reflects the aspiration to defeat a powerful force that nobody in this world has total control over: the economy. When the economy between 2008 to 2009 of El Salvador diminished, as demonstrated within Source A, the non-classical Salvadoran leaders refuted Adam Smith’s idea of a self adjusting market.Instead they adopted Keynesian models. To fulfill the goal of fostering economic growth during the recession, the governmental leaders shifted the aggregate demand curve to the right. This objective was met during El Salvador’s great recession through the government’s use of monetary policy and fiscal policy.
Before discussing the measures

When reduced demand from decreased spending furthered the recession in 2008, Salvadoran leaders sought solutions towards Keynes negative multiplier effect within their economy. Salvadoran government leaders sought solutions that were mentioned within the Economic Survey of Latin America and the Caribbean,“...to lessen these negative effects, in April 2009, the Central Reserve Bank of El Salvador began to return 3% of the liquidity provision (1.3% of GDP) that had been established for contingencies in connection with financial volatility and the presidential elections.” The implementation of returning liquidity provision reflects a form of expansionary monetary policy. As a result, more money flowed into the economy as people’s disposable income increased. This tool helped boost the

According to the Quarterly Report of Tax Policy and Administrative Reform Project, published by the USAID, “Development Alternatives Inc. (DAI) and its Tax Policy and Administration Reform (TPAR) team to design and implement a program for modernizing and improving tax policy and administration in El Salvador.” DAI’s aspiration in helping El Salvador prosper reflected off the Quarterly Report assertions that, “The TPAR project is working with the DGII to help them achieve their targets for the tax administration: Increase tax revenues equivalent to 2.5-3.0% of GDP by 2009… 50% reduction in tax evasion and avoidance in VAT, income tax, and excise tax.” In order to achieve their goal of fostering economic growth, a group of Salvadoran leaders and leaders collaborating with El Salvador prepared the following objectives for late 2008, “ Build the capacity and systems required to achieve the MOF’s ambitious revenue targets; Establish the impartial transparent, and rigorous procedures necessary to reduce tax evasion; and strengthen the analytical abilities necessary for the DGII to gauge the fiscal impact of current law and proposed reforms and to serve as an ongoing source of expert advice to senior policy makers.” From such objectives, the government's actions in decreasing withheld tax rates effectively fostered economic growth. Source C reflects how