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Growth and External Financing in Latin America

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Author Info

  • Guillermo A. Calvo
  • Eduardo Fernández-Arias
  • Ernesto Talvi
  • Carmen M. Reinhart

Abstract

This paper discusses the economic performance of Latin America in the last decade, paying special attention to growth and the financial sector. In particular, it shows that external factors, such as like U.S. interest rates and the business cycle, play a key role in capital inflows, investment, and growth. As a result, economic growth in the region tends to be fragile and exhibits a high degree of co-movement, i.e., high cross-country output correlation. This last feature exacerbates fragility, because there is little room for mutual insurance within Latin America in case a country suffers a bad shock, and finance during downturns has to come primarily from outside the region.

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Bibliographic Info

Paper provided by Inter-American Development Bank in its series IDB Publications with number 6490.

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Date of creation: Aug 2001
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Handle: RePEc:idb:brikps:6490

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Related research

Keywords: Financial Sector; Economics; WP-457;

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References

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  1. Eduardo Fernández-Arias & Peter Montiel, 2002. "Reform and Growth in Latin America: All Pain, No Gain?," Department of Economics Working Papers 2001-06, Department of Economics, Williams College.
  2. Reinhart, Carmen & Calvo, Guillermo & Fernandez Arias, Eduardo & Talvi, Ernesto, 2001. "The Growth-Interest Rate Cycle in the United States and its Consequences for Emerging Markets," MPRA Paper 9075, University Library of Munich, Germany.
  3. Reinhart, Carmen & Montiel, Peter, 2001. "The Dynamics of Capital Movements to Emerging Economies During the 1990s," MPRA Paper 7577, University Library of Munich, Germany.
  4. repec:fth:inadeb:418 is not listed on IDEAS
  5. Fernandez-Arias, Eduardo & DEC, 1994. "The new wave of private capital inflows : push or pull?," Policy Research Working Paper Series 1312, The World Bank.
  6. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1993. "“Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," MPRA Paper 7125, University Library of Munich, Germany.
  7. Reinhart, Carmen & Calvo, Guillermo, 2000. "When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options," MPRA Paper 6982, University Library of Munich, Germany.
  8. Hausmann, Ricardo & Panizza, Ugo & Stein, Ernesto, 2001. "Why do countries float the way they float?," Journal of Development Economics, Elsevier, vol. 66(2), pages 387-414, December.
  9. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
  10. repec:idb:brikps:61018 is not listed on IDEAS
  11. Ricardo Hausmann & Eduardo Fernández-Arias, 2000. "Foreign Direct Investment: Good Cholesterol?," Research Department Publications 4203, Inter-American Development Bank, Research Department.
  12. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, December.
  13. repec:fth:inadeb:429 is not listed on IDEAS
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Citations

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Cited by:
  1. Remberto Rhenals Monterroso & Alejandro Torres García, 2007. "Volatilidad de los flujos de capital hacia los países en desarrollo: evidencia para América Latina, 1970-2002," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 67, pages 9-42, Julio-Dic.
  2. Alicia García-Herrero & Álvaro Ortiz, 2005. "The role of global risk aversion in explaining Latin American sovereign spreads," Banco de Espa�a Working Papers 0505, Banco de Espa�a.
  3. Sebastian Sosa, 2008. "External Shocks and Business Cycle Fluctuations in Mexico," IMF Working Papers 08/100, International Monetary Fund.

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