As the U.S. economy continues to grow and the labor market tightens, there is an increasing likelihood that the Federal Reserve will raise interest rates. The consequences will reverberate in Latin America and the Caribbean. Our research suggests there are reasons for concern, but also ways countries can offset the risks. It is key that countries in the region take this … [Read more...] about How Vulnerable Are Latin American and Caribbean Economies to a Sudden Stop in Capital Flows?
After the Brexit referendum and the US election, commentators on all sides have sparred over who are the winners and losers when it comes to trade. Most economists agree that more trade on the whole is good, but that its impact can vary dramatically. The relationship between trade and inequality is then less obvious. For starters, the impacts of trade on inequality may be very … [Read more...] about Trade: Winners and Losers in the North and South
The policy of quantitative easing led by advanced economies and the subsequent surge of capital flows to emerging economies (EMEs) after the global financial crisis together with their recent reversal have highlighted the need to tailor a macro approach for EMEs that incorporates financial stability as an explicit policy target. But what should the approach be? Should it take … [Read more...] about Searching for a New Macroprudential Framework
Latin America, like the rest of the world, cautiously awaits the beginning of Donald Trump's presidency in the United States. There is great anticipation to see if the president elect fulfills his campaign promises—many of them already played down—and how his government's policies affect the region. In an interview with the Spanish daily El País, the IDB's chief economist, José … [Read more...] about Latin America and Trump: the IDB’s Chief Economist Identifies Potential Opportunities for the Region
Beginning in the early 2000s, corporations in emerging economies began to massively increase their borrowing in international capital markets. The reasons why this occurred are not completely clear though they most likely involve low interest rates globally and the search for higher yields by international investors. In any case, the surge was dramatic: between 2004 and 2014, … [Read more...] about Confronting the Risks of Corporate Debt in Latin America