Center and periphery: The spread of the crisis to Latin American economies

Abstract

Although the international crisis was initially perceived as an event limited to a particular segment of the financial systems of the central economies, it soon reached global dimensions through various transmission mechanisms, calling into question the so-called decoupling hypothesis. The economies of Latin America faced this new scenario under much more robust conditions than in previous crisis experiences. The good macroeconomic performance of the region during the five-year period prior to the start of the crisis reduced the vulnerability of these economies, and increased the degrees of freedom of the economic policy authorities to carry out countercyclical policies in the new international context. Despite the efforts made by these economies, a comprehensive policy response will require commitment of resources and coordination by major developed economies. In this sense, policy challenges are not limited to emerging economies, but rather imply a global coordination effort.

JEL classification: F42 ; F44 ; G01