
Contents
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Introduction Introduction
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Life after Russia, or the Chronicle of a ‘Sudden Stop’ Life after Russia, or the Chronicle of a ‘Sudden Stop’
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‘Sudden Stops’ and Macroeconomic Adjustment in Latin America ‘Sudden Stops’ and Macroeconomic Adjustment in Latin America
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The Chilean Experience The Chilean Experience
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From Macro Adjustment to Financial Crisis and Economic Collapse: The Polar Cases of Chile and Argentina From Macro Adjustment to Financial Crisis and Economic Collapse: The Polar Cases of Chile and Argentina
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Openness Openness
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‘Liability Dollarization ’ ‘Liability Dollarization ’
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Reflections on Policy Reflections on Policy
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Crisis Prevention Policies Crisis Prevention Policies
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SELF‐INSURANCE SELF‐INSURANCE
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CAPITAL CONTROLS CAPITAL CONTROLS
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EXCHANGE RATE REGIME EXCHANGE RATE REGIME
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DE‐DOLLARIZATION DE‐DOLLARIZATION
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TRADE POLICY TRADE POLICY
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Post‐crisis Policies Post‐crisis Policies
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FISCAL POLICY FISCAL POLICY
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INTEREST RATE POLICY INTEREST RATE POLICY
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Global Policies Global Policies
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References References
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8 8 Sudden Stop, Financial Factors, and Economic Collapse in Latin America: Learning from Argentina and Chile
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Published:April 2008
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Abstract
This chapter shows that the Russian 1998 crisis had a big impact on capital flows to Emerging Market Economies (EMEs), especially in Latin America, and that the impact of the Russian shock differs quite markedly across EMEs. To illustrate this statement, the polar cases of Chile and Argentina are compared. While Chile exhibited a significant economic slowdown after August 1998, it did not suffer the excruciating collapse suffered by Argentina, where even the payments system came to a full stop. This difference is attributed to the fact that Chile is more open to trade than Argentina, and that it appears to suffer much less from balance-sheet currency-denomination mismatch that was rampant in Argentina before the 2002 crisis (due to large domestic liability dollarization). The chapter is essentially descriptive but is in line with and, thus, complements econometric studies like Calvo, Izquierdo, and Mejia (NBER Working Paper 10520). The final section addresses policy issues in light of the chapter's findings and conjectures.
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