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Good-Bye financial crash, hello financial eclecticism: Latin American responses to the 2008–09 global financial crisis

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  • Pastor, Manuel
  • Wise, Carol

Abstract

1985 saw the publication of Carlos Díaz-Alejandro's classic article, “Good-Bye Financial Repression, Hello Financial Crash” (1985). Writing in the wake of drastic financial blowups in the Southern Cone, Díaz-Alejandro nonetheless argued that “a believable alternative system could be designed, avoiding many of the inefficiencies of financial repression … and blending both public and private financial agents” (18). Nearly three decades after the publication of this prescient work, there are credible signs that such an arrangement is now emerging within some Latin American emerging economies (EEs). Just as Díaz-Alejandro studied how the 1982 debt shocks both exacerbated and shed light on financial sector policies and institutions in the Southern Cone countries, we use the 2008–09 global financial crisis (GFC) as a lens through which to examine the policymaking capabilities of six Latin American countries. We find that several of the countries successfully weathered the 2008–09 financial shocks and argue that this is due to: institutional modernization that facilitated policy learning and a more business-friendly climate; and, to sustainable improvements in income distribution that may have facilitated consensus-building. These factors, we suggest, gave policymakers both the expertise and the political space to employ more nuanced fiscal and financial policies.

Suggested Citation

  • Pastor, Manuel & Wise, Carol, 2015. "Good-Bye financial crash, hello financial eclecticism: Latin American responses to the 2008–09 global financial crisis," Journal of International Money and Finance, Elsevier, vol. 52(C), pages 200-217.
  • Handle: RePEc:eee:jimfin:v:52:y:2015:i:c:p:200-217
    DOI: 10.1016/j.jimonfin.2014.11.019
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    More about this item

    Keywords

    Latin America; Global financial crisis; Capital mobility; Macro-prudential policy; Counter-cyclical policy; Institutional reform;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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