Working Paper: NBER ID: w9580
Authors: Alan M. Taylor
Abstract: This paper examines the history of foreign investment in Latin America in the two centuries since independence. Investment flows to the region were sometimes large and always volatile. Symptoms of overborrowing, sudden stops, debt, default and crises have been evident from the beginning. In general the economies in the hemisphere struggled for most of the nineteenth century to develop reputations for macroeconomic stability and sound finance, and foreign capital was thus repelled for the long periods. In the twentieth century, most of the region, like the rest of the world, turned inward and against foreign capital markets, a policy trend that emerged in the interwar period and has only recently begun to reverse. These historical perspectives shed light on the region's current relative isolation and its future economic challenges.
Keywords: No keywords provided
JEL Codes: F21; F33; F34; F36; N16; N26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Foreign capital inflows (F21) | Economic growth (O49) |
| Foreign capital inflows (F21) | Changes in income distribution (D31) |
| Foreign capital inflows (F21) | Sectoral growth (O41) |
| Increased foreign investment (F21) | Economic development (O29) |
| Political and institutional obstacles (O17) | Hindered foreign investment (F21) |
| Volatility of investment flows (F21) | Long-term macroeconomic instability (E32) |
| Long-term macroeconomic instability (E32) | Barrier to sustained foreign investment (F21) |
| Historical experiences of defaults (G33) | Current perceptions and behaviors of foreign investors (F21) |