Domestic Financial Liberalization and External Debt in the 1970s: Building a Major Crisis

Ricardo Ffrench-Davis

Chapter III in Economic Reforms in Chile, 2010, pp 77-106 from Palgrave Macmillan

Abstract: Abstract The Chilean economy recorded great fluctuations in its economic activity during the period 1974–81 (see Foxley 1983; Ramos, 1986; Edwards and Cox-Edwards, 1987). In all, GDP growth averaged 3% per year; a figure notably lower than the 5.6% recorded by Latin America in the 1970s. Note that in the year after the end of that period, 1982, the debt crisis brought a generalized recession in the region; it was particularly acute in Chile. It is extremely informative that the deepest recession in the entire region took place in a Chilean economy that had eliminated the fiscal deficit, privatized many public firms, sharply liberalized imports and the domestic capital markets, and was praised by international financial markets and institutions as a highly “successful” economy. The Chilean outcome shares causes and results with those of Mexico in the “tequila” crisis of 1995, and with the currency and debt crisis of Argentina in 1998–2002.1

Keywords: Exchange Rate; Interest Rate; Real Exchange Rate; Capital Flow; Capital Inflow (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-28965-9_3

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DOI: 10.1057/9780230289659_3

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