Working Paper: NBER ID: w11153
Authors: Guillermo A. Calvo; Ernesto Talvi
Abstract: This paper shows that the Russian 1998 crisis had a big impact on capital flows to Emerging Market Economies, EMs, especially in Latin America, and that the impact of the Russian shock differs quite markedly across EMs. To illustrate this statement, we compare the polar cases of Chile and Argentina. 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. We attribute their difference 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 paper 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 paper's findings and conjectures.
Keywords: No keywords provided
JEL Codes: F31; F32; F34; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 1998 Russian crisis (F65) | increase in interest rates (E43) |
| increase in interest rates (E43) | sudden stop in capital flows to Latin America (F32) |
| systemic collapse in capital flows (F65) | varying impacts on Argentina and Chile (N56) |
| trade openness (F43) | economic resilience during external shocks (F41) |
| liability dollarization (F65) | economic resilience during external shocks (F41) |
| economic vulnerabilities (F65) | economic outcomes in Argentina and Chile (N16) |