Global finance, macroeconomic performance, and policy response in Latin America: Lessons from the 1990s

In the 1990s globalization brought to most countries in Latin America unprecedented challenges for policymakers. This paper examines the interaction between the changing economic environment and the response of policymakers to the volatility experienced by international capital markets. In doing so, a number of lessons regarding the design of economic policy, and in particular fiscal policy are presented. The analysis focuses on issues such as fiscal sustainability in the presence of liquidity constraints, debt management strategies in emerging markets, the design of policy in response to sudden stops in capital flows, and the role of the International Monetary Fund.