Organizing Institution:

Inter-American Development Bank, Research Department

Chair:

Ricardo Caballero, Massachusetts Institute of Technology

Background:

In recent times, the Emerging Market (EM) landscape has been hit by financial crises of severe magnitude. Most of them affected a wide range of countries with quite diverse fundamentals. These crisis episodes were characterized by systemic capital market turmoil, as evidenced by skyrocketing EM aggregate bond spreads and large capital flow reversals. In several cases, financial crises coincided with severe output loss. What do we know now that we didn't before? Why and how does turmoil at central capital markets turn into full-fledged Sudden Stops in capital flows in EMs? What are the key domestic vulnerabilities that can transform an external financial shock into a financial crisis and an economic collapse? How do countries recover from these output collapses? Could these crises have been avoided? What are the challenges ahead at the country level? And at the systemic level? These and other questions will be addressed in this session, backed by empirical and theoretical results stemming from an extensive research agenda.

Speakers:

Ernesto Talvi, Executive Director, CERES, Uruguay

Guillermo Calvo, Chief Economist, Inter-American Development Bank

Alejandro Izquierdo, Inter-American Development Bank

Ricardo Caballero, Massachusetts Institute of Technology