While there is still a lack of credit in Latin America, the region has proved it can continue to grow, paticularly with improved bankruptcy regulations and corporate governance
Is it possible that some emerging markets economies grow strongly without credit? A recent report by economists Guillermo Calvo, Alejandro Izquierdo and Ernesto Talvi, called Phoenix Miracles in Emerging Markets: Recovering without Credit from Systemic Financial Crisis, examined this very question. It found output recovers with virtually no recovery in either domestic or foreign credit, a phenomenon called the Phoenix Miracle, where output 'rises from its ashes', suggesting that firms should go through a process of financial engineering to restore liquidity outside of the formal credit ma...
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