With inflation in Latin America and the Caribbean running at its hottest in two decades, the issue of where that inflation comes from and what the region’s central banks might do differently has taken on great urgency. Our newly released study arrives at a hugely important conclusion: the overwhelming bulk of inflation in the region […]

The post The Universal Factors Behind Inflation in Latin America and the Caribbean appeared first on Ideas Matter.

With the first signs of decelerating inflation in the United States, countries in Latin America and the Caribbean are probably asking themselves when borrowing costs will fall again. Lower inflation rates in the US, after all, could allow the Federal Reserve to end its cycle of rising interest rates sooner than expected and start eventually […]

The post US Interest Rates and the Cost of Borrowing for Emerging Economies appeared first on Ideas Matter.

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 […]

The post Inflation in Latin America and the Caribbean Needs to be Seen in Context appeared first on Ideas Matter.

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, […]

The post When Worsening Credit Conditions Trigger Recessions appeared first on Ideas Matter.

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 […]

The post What Brazil Can Teach About Fighting Inflation appeared first on Ideas Matter.

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 […]

The post When Central Bank Autonomy Makes All the Difference appeared first on Ideas Matter.

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 […]

The post A New Look at Real Exchange Rates appeared first on Ideas Matter.

Countries have long relied on the issuance of debt to finance their expenditures and investments. However, it can be risky. Episodes such as the worldwide debt crisis of 1983, with its dramatic effects on Latin America, and the more recent European debt crisis, show that countries need to be cautious when choosing their debt levels. […]

The post When Expectations Push a Country to Default appeared first on Ideas Matter.