Econ 161-Lecture 15

Econ 161-Lecture 15 - GlobalIntegrationofLatinAmerica...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: GlobalIntegrationofLatinAmerica Lecture15 c Marc-AndreasMuendler UniversityofCalifornia,SanDiego May24,2011 15.TheDebtCrisisofthe1980sandDebtRestructuring Econ161, c M.Muendler TheCostsandBenefitsofInternationalMoney Borrowercountriescanfinancetheirinvestmentsandgrowthdespite lowerdomesticsavingsrates. Internationallenderscanreaphigherreturnsforhigherrisksandben- efitfromopportunitiestodiversifytheirportfolios. Borrowersrisksharperrecessionsfollowingpossiblecrises. Lendersrisksharpdepreciationsandsovereigndefaults. Regulatedandwellsupervisedfinancialsectors,alongwithacare- fulmanagementofthedebtstructure,canmitigatetheriskswithout sacrificingthebenefits. 15.TheDebtCrisisofthe1980sandDebtRestructuring Econ161, c M.Muendler TheDebtCrisisofthe1980s AfteradecadeofrelativelyhighcreditflowstoLatinAmerica,in1982 Mexicodeclaresitselfunabletoserviceitsforeigndebt Mexicosdefault(thelargestinhistoryatthetime)makesinternational lendersreconsidertheircredittootherLatinAmericaneconomies Unsuccessfulmacroeconomicstabilizationpoliciesandstructuralre- formsresultinLatinAmericasLostDecade Debtrestructuringandthereturnofinternationalcapitalduringthe 1990salleviatedtheburdenbutstronggrowthhasyettoresume 15.TheDebtCrisisofthe1980sandDebtRestructuring Econ161, c M.Muendler ForeignBorrowingandtheCurrentAccount TheCurrentAccountrecordsthechangeinacountrysnetassetpo- sition W ThecompleteCurrentAccount CA =( EX IM )+ R W includes theTradeBalance ( EX IM ) andForeignIncome R W . Inanopeneconomywithanon-zeroCurrentAccountbalance,Gross DomesticProductandGrossNationalIncomediffer: Y GNI = Y GDP + R W. 15.TheDebtCrisisofthe1980sandDebtRestructuring Econ161, c M.Muendler Production,NationalIncome,andTradeRevisited GDP:GrossDomesticProduct Y GDP = C + I + G +( EX IM ) GDPignoresforeignincome R W :Incomeearnedonforeignassetholdings Foreigninvestorsearninterest R ontheirwealth W inLatinAmerica( W< ) EX :Productionshippedabroad, IM :Productsobtainedthroughimporting TheCurrentAccountBalance CA =( EX IM )+ R W includes theTradeBalance ( EX IM ) andForeignIncome R W . Interestpayments R W< mustbefinancedwithnetexports 15.TheDebtCrisisofthe1980sandDebtRestructuring Econ161, c M.Muendler Production,NationalIncome,andTradeRevisited GNI:GrossNationalIncome Y GNI = C + I + G +( EX IM )+ R W R W :Incomeearnedonforeignassetholdings Foreigninvestorsearninterest R ontheirwealth W inLatinAmerica( W< ) EX :Incomeearnedbyexporting, IM :Incomespentbyimporting TheCurrentAccountBalance CA =( EX IM )+ R W includes theTradeBalance ( EX IM ) andForeignIncome R W . Interestpayments R W< mustbefinancedwithnetexports 15.TheDebtCrisisofthe1980sandDebtRestructuring Econ161, c M.Muendler ExternalDebtperGDPinArgentina,Brazil,CostaRicaandMexico R a t io o f D e b t p e...
View Full Document

Page1 / 34

Econ 161-Lecture 15 - GlobalIntegrationofLatinAmerica...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online