Reinhart, Carmen (2013): Goodbye Inflation Targeting, Hello Fear of Floating? Latin America after the Global Financial Crisis*. Forthcoming in: Ernesto Zedillo (ed.) Latin America: Taking Off or Still Falling Behind. (2013)
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Abstract
This paper focuses on some of the macroeconomic risks that lie ahead for Latin America. The discussion is informed by my work on crises and capital flows and their macroeconomic consequences. The trends and initial conditions that allowed the region to weather the global economic storm of 2008-2009 are discussed, as is the subsequent reversal of some of those benign trends. I review the historical patterns connecting large capital inflow surges, or “capital flow bonanzas,” with the likelihood of a variety of crises—banking, currency, external default and inflation. For Latin America, in particular, large capital flow bonanzas have seldom ended well. The implications for inflation of importing (via less than fully flexible exchange rates) the expansionary policy of the “North” are discussed.
Item Type: | MPRA Paper |
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Original Title: | Goodbye Inflation Targeting, Hello Fear of Floating? Latin America after the Global Financial Crisis* |
Language: | English |
Keywords: | capital inflows, appreciation, currency crises, banking crises, inflation, debt |
Subjects: | E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation F - International Economics > F3 - International Finance F - International Economics > F3 - International Finance > F30 - General G - Financial Economics > G0 - General > G01 - Financial Crises N - Economic History > N1 - Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations > N16 - Latin America ; Caribbean N - Economic History > N2 - Financial Markets and Institutions > N26 - Latin America ; Caribbean |
Item ID: | 51282 |
Depositing User: | Carmen Reinhart |
Date Deposited: | 08 Nov 2013 14:48 |
Last Modified: | 27 Sep 2019 10:02 |
References: | Calvo, Guillermo A., 1998. “Capital Flows and Capital-market Crises: The Simple Economics of Sudden Stops,” Journal of Applied Economics, Vol. 1, No. 1, November, 35-54. Calvo, Guillermo A., Leonardo Leiderman, and Carmen M. Reinhart“Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors”, IMF Staff Papers, Vol. 40 No. 1, March 1993, 108-151. Calvo, Guillermo A., and Enrique G. Mendoza. 1996. “Mexico’s Balance-of-Payments Crisis: A Chronicle of a Death Foretold.” Journal of International Economics 41 (November): 235–64. Calvo, Guillermo A., and Carmen M. Reinhart “Fear of Floating,” Quarterly Journal of Economics, Vol. CXVII No. 2, May 2002, 379-408. Calvo, Guillermo A., and Ernesto Talvi, “Sudden Stop, Financial Factors and Economic Collapse in Latin America: Learning from Argentina and Chile,” NBER Working Paper 11153, February 2005. Diaz-Alejandro, Carlos, “Good-bye Financial Repression, Hello Financial Crash,” Journal of Development Economics 19, (1985), 1-24. Diaz-Alejandro, Carlos, “Stories of the 1930s for the 1980s” In Pedro Aspe, et al. (eds.) Financial Policies and the World Capital Market: The Problem of Latin American Countries, Chicago: The University of Chicago Press for the NBER, 1983. Diaz-Alejandro, Carlos, “Latin American Debt: I Don’t Think We are in Kansas Anymore”, Brookings Papers on Economic Activity, (1984), Vol. 2, 335-403. Frankel, Jeffrey A, Carlos A. Végh, Guillermo Vuletin, 2013. Journal of Development Economics Vol.100, No.1, January, 32-47. Goldfajn, Ilan and Rodrigo Valdes, “The Aftermath of Appreciations,” Quarterly Journal of Economics 116(1), February 1999, 229-262. International Monetary Fund, 2012. World Economic Outlook, April and October. Kaminsky, Graciela L. and Carmen M. Reinhart, “The Twin Crises: The Causes of Banking and Balance-of-Payments Problems,” American Economic Review 89, no. 3 (1999): 473-500. Lane, Philip R. and Gian Maria Milesi-Ferretti (2010), "The External Wealth of Nations Mark II: Revised Extended Estimates of Foreign Assets and Liabilities,1970-2004" in Crowe et. a. eds., Macrofinancial Linkages: Trends, Crises, and Policies, Washington DC: International Monetary Fund. http://www.philiplane.org/EWN.html Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2007. "Fear of Appreciation," Working Paper Series rwp07-047, Harvard University, John F. Kennedy School of Government. Mendoza, Enrique, G. and Marco E. Terrones, 2012. "An Anatomy of Credits Booms and Their Demise," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, Vol. 15, No. 2, 4-32, August. Reinhart, Carmen M., and Vincent R. Reinhart, 2009. “Capital Flow Bonanzas: An Encompassing View of the Past and Present,” in Jeffrey Frankel and Francesco Giavazzi(eds.) NBER International Seminar in Macroeconomics 2008, (Chicago: Chicago University Press for the NBER). 1-54. Reinhart, Carmen M., and Kenneth S. Rogoff, 2009, This Time is Different: Eight Centuries of Financial Folly (Princeton, New Jersey: Princeton University Press). Reinhart, Carmen M. Kenneth S. Rogoff “Growth in a Time of Debt,” NBER Working Paper 15639, January 2010. Reinhart, Carmen M., and M. Belen Sbrancia, 2011. “The Liquidation of Government Debt,” NBER Working Paper 16893, March 2011. Forthcoming in Economic Policy. World Bank, 2013, International Debt Statistics, Washington DC http://data.worldbank.org/data-catalog/international-debt-statistics World Bank, 2013, Quarterly External Debt Statistics, (QEDS), http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/EXTDECQEDS/0,,menuPK:1805431~pagePK:64168427~piPK:64168435~theSitePK:1805415,00.html |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/51282 |
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