Why Are Latin American Crises Deeper Than Those in Emerging Asia, Including That of COVID-19?

Abstract

The COVID-19 pandemic has challenged global economies with unparalleled negative shock. Asia and Latin America have gone through a number of financial crises in the last few decades but they have addressed those crises rather differently, leading to different growth trajectories after the shocks.We take a closer look at the past crises in Latin America and Asia, such as the Latin American balance-of-payment crisis in the 1980s and a number of Latin American banking crises in the 1990s and compare them with the Asian financial crisis in 1997 and draw lessons on their differences and the policy responses to shed some light on the situation today with the pandemic. All in all, Latin American countries are challenged with worse debt dynamics and more limited access to dollar liquidity. Asia, instead, seems to have developed a much more resilient macroeconomic framework as well as larger self- and regional insurance.