Capítulos de libros
Domestic financial frictions and the transmission of foreign shocks in Chile
Fecha
2015Registro en:
978-956-7421-47-3
Autor
García-Cicco, Javier
Kirchner, Markus
Justel, Santiago
Institución
Resumen
Abstract: In the early 90’s a literature emerged emphasizing the role of
external factors in explaining business cycle fluctuations in emerging
countries. In particular, changes in the terms of trade and world
interest rates are generally viewed as the main external factors
affecting these economies. Additionally, part of this literature has
also highlighted the role of financial frictions in explaining the
propagation of external shocks where these frictions arise in the
relationship between foreign lenders and domestic borrowers. The
role of country premia, the possibility of sovereign default, and
financial dollarization are some of the propagation mechanisms that have been highlighted by this literature. All these features
generate a wedge between foreign and domestic interest rates. Given
the number of financial and currency crises, as well as episodes of
sovereign default, that have affected the emerging world in the 80’s
and 90’s, it is not hard to see the relevance of these arguments.