Heading into Trouble: A Comparison of the Latin American Crises and the Euro Area's Current Crisis

Produced by: 
Banco de México
Available from: 
August 2014
Paper author(s): 
Manuel Ramos-Francia
Ana María Aguilar-Argaez
Santiago García-Verdú
Gabriel Cuadra-García
Financial Economics
Macroeconomics - Economic growth - Monetary Policy

We compare the experience of Latin American external debt crises, in particular the one in the 80s, with the current European one. We do so with the aim of shedding some light on the needed adjustment mechanisms. We argue for the need of much larger debt relief in Europe. To address the moral hazard problems that would arise, we propose providing such relief conditional on the reduction of both the fiscal and the current account deficits to zero as a commitment signal.


Research section: 
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