Abstract and Keywords
This article focuses on the mechanisms that underlie the confidence game between government and markets in a scenario of increased capital mobility. Section 2 begins by putting the recent changes in Latin American financial markets into historical perspective. Section 3 reviews theories about the political consequences of the internationalization of domestic financial markets and discusses how these theories can illuminate the experience of emerging economies in the region. Next, it surveys major empirical findings on the consequences of financial integration in the particular case of Latin American countries. The subsequent section moves from macroconsequences of capital mobility to its microfoundations; it examines what recent work tells us about how financial markets “vote” in Latin American elections and explores the conditions under which this vote influences policymaking. The last section proposes potential venues for future research.
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