Rising prices for food, fuel and other household necessities are rattling people throughout Latin America and the Caribbean and hitting poor families already affected by the pandemic especially hard. But if inflation is again haunting the region, and policymakers are worried, it is important to keep the new developments in context. Inflation is far from a regional … [Read more...] about Inflation in Latin America and the Caribbean Needs to be Seen in Context
When Worsening Credit Conditions Trigger Recessions
Economists have long known that aggregate measures of economic activity vary during recessions. Unemployment rates increase, for example, while both GDP growth and investment rates decrease. But when we look at actual firms, the individual units of production in an economy, during a recession do they all behave in the same way? And if not, can we use that information to learn … [Read more...] about When Worsening Credit Conditions Trigger Recessions
What Brazil Can Teach About Fighting Inflation
For much of the 1980s and early 1990s, Latin America and the Caribbean was in the throes of hyperinflation. In 1990, for example, 16 of 20 countries in the region had inflation rates above 20%, while in 2018 only three of those countries had inflation above 8%, according to IMF figures. The main ingredients to that success were fiscal reforms, debt negotiations that allowed … [Read more...] about What Brazil Can Teach About Fighting Inflation
When Central Bank Autonomy Makes All the Difference
Since the late 1990s, a broad reform movement has swept Latin America, aimed at granting independence to central banks and freeing them from government pressure to print money to finance government spending. Laws have been passed and constitutions changed to allow independent central banks to focus on the fight against inflation. A more complicated case has been Brazil, where … [Read more...] about When Central Bank Autonomy Makes All the Difference
A New Look at Real Exchange Rates
The real exchange rate — or the cost of a country’s goods relative to foreign goods — has long been a fundamental measure of the strength of a nation's importers and exporters. Among important commodity exporters in Latin America, it is closely tied to the price of commodities. But commodity prices aren't only essential for Latin American trade. Given their critical role as … [Read more...] about A New Look at Real Exchange Rates