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

IADB, Research Department Working Paper No. 440

33 Pages Posted: 28 Dec 2000

See all articles by Eduardo Fernandez-Arias

Eduardo Fernandez-Arias

Inter-American Development Bank (IDB)

Ricardo Hausmann

Harvard University - Harvard Kennedy School (HKS)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2000

Abstract

This paper considers ongoing and proposed reforms of the international financial system in light of Latin America's recent experience of volatility and a regional recession largely resulting from financial contagion. The authors begin by surveying three diagnoses of Latin America's financial difficulties: excessive capital flows, insufficient capital flows, and excessively volatile capital flows?each diagnosis is proposed by groups with different interests and perceptions. A historical review suggests, though, that theories of excessive capital flows lack empirical support, even though these theories largely underlie both current and suggested reforms. A subsequent section evaluates reform proposals involving official financial support, private sector involvement, and financial standards and regulations in terms of their distributive effects and implications for international political economy. Concluding, the authors express support for measures to reduce contagion and liquidity crises, such as an international bankruptcy court, and attribute Latin American financial difficulties at least in part to "original sin," countries' inability to borrow long-term in their own currencies.

Suggested Citation

Fernandez-Arias, Eduardo and Hausmann, Ricardo, The Redesign of the International Financial Architecture from a Latin American Perspective: Who Pays the Bill? (December 2000). IADB, Research Department Working Paper No. 440, Available at SSRN: https://ssrn.com/abstract=254772 or http://dx.doi.org/10.2139/ssrn.254772

Eduardo Fernandez-Arias (Contact Author)

Inter-American Development Bank (IDB) ( email )

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Ricardo Hausmann

Harvard University - Harvard Kennedy School (HKS) ( email )

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United States
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HOME PAGE: http://www.hks.harvard.edu/about/faculty-staff-directory/ricardo-hausmann

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