IDEAS home Printed from
   My bibliography  Save this article

Foreign exchange pressures in Latin America: does debt matter?


  • Alex Mandilaras

    (University of Surrey, Guildford, UK)

  • Graham Bird

    (University of Surrey, Guildford, UK)


Latin American countries have been in the eye of economic and financial storms several times in recent years. Advice from the International Monetary Fund has consistently highlighted the need for sound fiscal policies and lower debt levels. But is public debt relevant? Following a brief discussion of the theoretical issues involved, this paper examines empirically the relationship between public indebtedness and pressures in the foreign exchange market. Alternative measures are used to capture the latter and the analysis controls for a de facto classification of exchange rate regimes. Estimations of static and dynamic panels for 28 Latin American and Caribbean (LAC) countries report substantial fiscal effects. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Alex Mandilaras & Graham Bird, 2008. "Foreign exchange pressures in Latin America: does debt matter?," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(5), pages 613-627.
  • Handle: RePEc:wly:jintdv:v:20:y:2008:i:5:p:613-627 DOI: 10.1002/jid.1436

    Download full text from publisher

    File URL:
    File Function: Link to full text; subscription required
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
    2. Hutchison, Michael M. & Noy, Ilan, 2003. "Macroeconomic effects of IMF-sponsored programs in Latin America: output costs, program recidivism and the vicious cycle of failed stabilizations," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 991-1014, December.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 1-48.
    4. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    5. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
    6. Seater, John J, 1993. "Ricardian Equivalence," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 142-190, March.
    7. Soojin Moon & Ales Bulir, 2003. "Do IMF-Supported Programs Help Make Fiscal Adjustment More Durable?," IMF Working Papers 03/38, International Monetary Fund.
    8. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
    9. Bird, Graham & Mandilaras, Alex, 2006. "Regional heterogeneity in the relationship between fiscal imbalances and foreign exchange market pressure," World Development, Elsevier, vol. 34(7), pages 1171-1181, July.
    10. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    11. repec:hrv:faseco:34721963 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)


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

    Cited by:

    1. Julio Guzman, 2014. "Social Protection and Private Coping Strategies During Recessions: Evidence from Chile," Working Papers wp_041, Adolfo Ibáñez University, School of Government.
    2. Akram, Gilal Muhammad & Byrne, Joseph P., 2015. "Foreign exchange market pressure and capital controls," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 37(C), pages 42-53.
    3. Scott W. Hegerty, 2015. "Time-Varying Versus Fixed Weights in Exchange-Market Pressure Indices: Evidence From Tests Using Latin American Data," Bulletin of Applied Economics, Risk Market Journals, vol. 2(1), pages 21-36.
    4. Scott W. Hegerty, 2014. "Measuring Exchange Market Pressure and Its Contagion in the East African Community," South African Journal of Economics, Economic Society of South Africa, vol. 82(2), pages 239-257, June.
    5. Alexis Cruz Rodriguez, 2011. "Prediction of Currency Crises Using a Fiscal Sustainability Indicator," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 26(2), pages 39-60, December.

    More about this item

    JEL classification:

    • F30 - International Economics - - International Finance - - - General


    Access and download statistics


    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:wly:jintdv:v:20:y:2008:i:5:p:613-627. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.