ABSTRACT
On the one hand, in middle-income countries, cycles in capital flows create macroeconomic instability. Bank programs need to be calibrated to these cyclical flows. For example, in Latin America in 1998 and 1999, sudden reversals in private capital flows generated serious increases in poverty and unemployment, which in some countries rose to more than 18 percent. It has been very difficult since then to reduce unemployment and poverty. Although recently, unemployment has decreased, the shock was very costly in terms of poverty. In these circumstances, the increase in funds from multilaterals was very important.
