IDEAS home Printed from https://ideas.repec.org/a/oup/cambje/v37y2013i3p627-651.html
   My bibliography  Save this article

Revisiting Latin America's debt crisis: some lessons for the periphery of the eurozone

Author

Listed:
  • Santiago Capraro
  • Ignacio Perrotini

Abstract

A Domar–Pasinetti model of an emerging-market open economy with output growth endogenous to aggregate demand is presented, with foreign debt, interest and exchange rates playing a relevant role in the dynamics of the debt-to-GDP ratio (d). The model is used to assess the macroeconomic effects of the orthodox policy (fiscal austerity) implemented by policy makers to cope with the foreign debt crisis of Latin America in the 1980s. Such policy involved high costs in terms of welfare, job and output losses to no avail, since the region's financial fragility remained largely unresolved, in the end resulting in the so-called 'lost decade'. The main policy insight of Domar's and Pasinetti's analysis, we argue, posits a pro-growth expansionary policy as the most efficient strategy to abate and bring d to a sustainable path. Finally, we contend that Latin America's experience provides insight for dealing with the ongoing crisis of the periphery of the eurozone. Copyright , Oxford University Press.

Suggested Citation

  • Santiago Capraro & Ignacio Perrotini, 2013. "Revisiting Latin America's debt crisis: some lessons for the periphery of the eurozone," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 37(3), pages 627-651.
    • Handle: RePEc:oup:cambje:v:37:y:2013:i:3:p:627-651
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/cje/bet005
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Terzi, Alessio, 2020. "Macroeconomic adjustment in the euro area," European Economic Review, Elsevier, vol. 128(C).
    2. Santiago Capraro & Carlo Panico & Ignacio Perrotini & Francesco Purificato, 2012. "Austerit? o politiche coordinate ed espansive? Le difficili scelte delle autorit? europee," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2012(108), pages 81-112.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:cambje:v:37:y:2013:i:3:p:627-651. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/cje .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.