Question
In the late 1970s, several countries in Latin America, notably Mexico, Brazil, and Argentina, had accumulated large external debt burdens. A significant share of this
In the late 1970s, several countries in Latin America, notably Mexico, Brazil, and Argentina, had accumulated large external debt burdens. A significant share of this debt was denominated in US dollars. The United States pursued contractionary monetary policy from 1979 to 1982, raising dollar interest rates.
As a result, Latin American currencies [ depreciated / appreciated ], and hence their external debt in local currency terms [ decreased / increased ]. A way to prevent this change in external debt would have been to [ devalue / peg ]. However, this might have implied[ a greater increase in debt to make the new monetary arrangement work / a reccession, since they would have had to raise interest rates as well ].
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