This paper generates a typology of balance-of-payments crises under rational expectations, namely liquidity and solvency crises. The ex-post application of official financial rescue packages of sufficient size is a perfect cure for liquidity crises, but amounts to an ineffective and costly...

The Mexican oil boom was characterized by a period of high investment, followed by capital flight. The private sector and households responded to the 1977-1981 windfall by attaining high savings rates. On the other hand, the Mexican government, the proprietor of the state oil company and the...

Recent policy debates on the reform of social service delivery systems focus on the decentralization of services and the introduction of competition in order to improve the quality of services. Despite the common assumption that public sector unions oppose these reforms, their responses were...

In the context of a perfect foresight, intertemporal optimizing, cash-in-advance model, this paper studies the dynamics of an inconsistent exchange rate-based stabilization policy that fixes the exchange rate without an underlying fiscal adjustment to ensure that the exchange rate policy is...

This paper presents a test to discriminate among behaviors of producers of exhaustible resources. The behavior of a competitive producer of an exhaustible resource should follow an Euler equation. The existence of futures markets allows us to sidestep the difficult issues related to estimating...

This paper presents a model in which trade is motivated both by preference for variety and comparative advantages. This framework is used to analyze the welfare implications of trading blocs among countries with different endowments with and without transportation costs

Some analysts rank Chile as the only Latin American economy that qualifies as a `take-off economy,` or development economy. In a sense, Chile`s enduring success and proved insulation from the `Tequila effect` are due to its high national savings. What has made Chile`s savings so high? What were...

Baumol (1967) showed that the rate of growth of an economy slows down if a sector has lower productivity than others and the demand between goods is inelastic. This paper points out that trade is equivalent to technological progress in the tradable sector. Therefore an open economy has higher...

This paper argues that the experiences with banking crises in Latin America have been different from those in the industrial world because of the peculiarities of Latin American financial systems. Hence, applying the lessons derived from crisis resolution in the industrial world is not...

This paper reviews recent experience with international capital flows in Latin America, and discusses the policy issues that surround them. The paper is predicated on three basic premises. Capital flows to the region are an important source of macroeconomic disturbance. Also, capital flows are...