Latin American economies are exposed to substantial external vulnerability. Domestic imbalances and terms of trade shocks are often exacerbated by sudden financial distress. This paper explores ways of overcoming external vulnerability, drawing lessons from a detailed comparison of the response...

This paper identifies Chile`s economic weaknesses and offers policy recommendations for increasing stability. Current problems include weak international financial links, a Central Bank mandate that is ill-designed to deal with terms of trade shocks, a propensity to waste scarce liquidity in the...