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The Redesign of the International Financial Architecture from a Latin American Perspective: Who Pays the Bill?

  • Eduardo Fernández-Arias


  • Ricardo Hausmann

This paper considers ongoing and proposed reforms of the international financial system in light of Latin America`s recent experience. Most proposals are based on one of three diagnoses: excessive capital flows, insufficient capital flows, and excessively volatile capital flows. While theories of excessive capital flows lack empirical support, these views underlie both current and suggested reforms. A subsequent section evaluates proposals involving official financial support, private sector involvement, and financial standards and regulations. The paper supports measures to reduce contagion and liquidity crises, such as an international bankruptcy court, and attribute Latin American financial difficulties in part to "original sin", countries` inability to borrow long-term in their own currencies.

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Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4245.

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Date of creation: Dec 2000
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Handle: RePEc:idb:wpaper:4245
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  1. Jeremy Bulow & Kenneth Rogoff, 1998. "Sovereign Debt: Is to Forgive to Forget," Levine's Working Paper Archive 209, David K. Levine.
  2. Fischer, S. & Cooper, R.N. & Dornbusch, R. & Garber, P.M. & Massad, C. & Polak, J.J. & Rodrik, D. & Tarapore, S.S., 1998. "Should the IMF Pursue Capital-Account Convertibility?," Princeton Essays in International Economics 207, International Economics Section, Departement of Economics Princeton University,.
  3. Greenwald, Bruce & Stiglitz, Joseph E & Weiss, Andrew, 1984. "Informational Imperfections in the Capital Market and Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 74(2), pages 194-99, May.
  4. Raffer, Kunibert, 1990. "Applying chapter 9 insolvency to international debts: An economically efficient solution with a human face," World Development, Elsevier, vol. 18(2), pages 301-311, February.
  5. Michael P. Dooley, 1997. "A Model of Crises in Emerging Markets," NBER Working Papers 6300, National Bureau of Economic Research, Inc.
  6. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June.
  7. Tullio Jappelli & Marco Pagano, 1999. "Information Sharing in Credit Markets: International Evidence," Research Department Publications 3069, Inter-American Development Bank, Research Department.
  8. Roberto Chang & Andres Velasco, 1998. "The Asian liquidity crisis," FRB Atlanta Working Paper No. 98-11, Federal Reserve Bank of Atlanta.
  9. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," NBER Working Papers 7265, National Bureau of Economic Research, Inc.
  10. Robert Litan & William Isaac & William Taylor, 1994. "Financial Regulation," NBER Chapters, in: American Economic Policy in the 1980s, pages 519-572 National Bureau of Economic Research, Inc.
  11. Bayoumi, Tamim A. & Rose, Andrew K., 1993. "Domestic savings and intra-national capital flows," European Economic Review, Elsevier, vol. 37(6), pages 1197-1202, August.
  12. Buiter, Willem H & Sibert, Anne C, 1999. "UDROP: A Contribution to the New International Financial Architecture," International Finance, Wiley Blackwell, vol. 2(2), pages 227-47, July.
  13. Buiter, Willem H. & Sibert, Anne, 1999. "UDROP: A Small Contribution to the New International Financial Architecture," CEPR Discussion Papers 2138, C.E.P.R. Discussion Papers.
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