From the Boom in Capital Inflows to Financial Traps
Working Paper #56
The paper examines the performance of highly indebted countries from the point of view of their links with the international financial market. Although the more analytical parts of the paper do not refer specifically to Latin America (LA) it considers the regional emergent markets' experiences as examples and historical background. Two reasons explain the focus: LA countries participated in the financial globalization process from the beginning, in the late sixties-early seventies and the most important cases of high indebtedness took place in the region.
The paths followed by some countries in the globalization process led them to situations of segmented integration. Persistently high country risk premiums place the country in a sort of financial trap, with high interest rate and low growth, highly vulnerable to contagion and other sources of volatility and imposing narrow limits to the degrees of freedom of economic policy. The paper suggests that domestic policy implemented during the process of financial integration, account for most of the variation in the present situation of the different emergent markets.
About the Author
Principal Research Associate
Roberto Frenkel is Principal Research Associate at CEDES (from 1977) and Professor at the University of Buenos Aires (from 1984). Presently he is also Director of the Graduate Program on Capital Markets (University of Buenos Aires) and teaches graduate courses at the Di Tella and FLACSO-San Andrés Universities in Argentina. He was Professor at the University of Chile, University Católica de Chile, University Central de Venezuela and also visiting professor at the University of California (San Diego), University Católica de Rio de Janeiro and University of Pavia (Italy). He has been a consultant of several international organizations including UN, ILO, UNCTAD, UNDP, ECLAC, and he has also worked for the OECD Development Center, IDB, UNIDO and the governments of Argentina, Bolivia, Colombia, Venezuela and Uruguay. He was Undersecretary Chief of Economics Advisors to the Ministry of Finance (1985-89) and a member of the Board of Directors of the Banco de la Provincia de Buenos Aires (1999-2003) both in Argentina. He is a member of the Board of the World Institute for Development Economic Research (WIDER), United Nations University. He was a member of the UNDP Advisers Group. He published numerous books and articles in academic journals on macroeconomic theory and policy, money and finance, inflation and stabilization policies and labor market and income distribution, with special focus on Argentina and Latin America.