With food inflation for a median country in Latin America and the Caribbean running at 14% in 2022, its highest level in 20 years and even core inflation — excluding energy and food — running at 7%, central banks in the region have been compelled to keep interest rates aloft. This has contributed to an […]

The post The Delicate Balance of Protecting Income While Fighting Inflation appeared first on Ideas Matter.

Since 2020, the economies of the world have been hit by a series of severe shocks, most dramatically the COVID-19 pandemic and the Russian invasion of Ukraine. As a result, after growing around 3.9% last year, Latin America and the Caribbean region now faces considerably lower growth projections for 2023, with private forecasters predicting growth […]

The post Preparing the Macroeconomic Terrain for Renewed Growth appeared first on Ideas Matter.

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.

Inflation in Latin America is currently running at its highest level in 15 years. With uncertainty about how it will unfold, the expectations of people and firms are largely de-anchored, meaning distinct from the central banks’ target levels, and thus a potential source of even greater inflation. Meanwhile, as world interest rates rise, countries in […]

The post Lessons from the Lost Decade for Confronting Inflation Today appeared first on Ideas Matter.

Boosting financial inclusion has long been essential in Latin America and the Caribbean, where more than 200 million people lack access to financial services and large numbers of citizens are unable to open a bank account because of poverty, geography, discrimination, and lack of proper identification. Alternative systems, however, could be transformative. They could be […]

The post Is There a Future for Digital Currencies Issued by Central Banks in Latin America and the Caribbean? appeared first on Ideas Matter.

After a robust economic recovery last year from the lows of the pandemic, Latin America and the Caribbean faces strong headwinds from potential new coronavirus variants, inflation-fighting efforts in advanced economies, and the war between Russia and Ukraine that could depress world growth and even push the region into recession by 2023.   Riding a […]

The post From Pandemic to Inflation and War: Challenges for Policymakers in Latin America and the Caribbean appeared first on Ideas Matter.

Inflation has become a growing concern for central banks in Latin America and the Caribbean. The recovery in economic activity was stronger than expected in the first months of 2021, reflecting the stimulus that governments deployed to mitigate the effects of the pandemic and higher mobility and lower containment measures. However, inflation and inflation expectations […]

The post Inflation and Its Impact on the Poor in the Era of COVID-19 appeared first on Ideas Matter.

In recent years, advances in the standardization and statistical treatment of standard variables have allowed greater precision in the reporting of short- and long-term economic activity, including, among others, GDP, inflation, and the unemployment rate. But the application of the complex, technical methodologies required in arriving at those calculations has also delayed the data’s publication, […]

The post How New Predictive Models and Timely Data Lead to Better Public Policy Decisions appeared first on Ideas Matter.

The year 2019 was the year anger over social issues took to the streets in Latin America and the Caribbean. Poverty and inequality in the region had fallen following the commodity boom of the 2000s, but more recent years of low growth brought that progress to a standstill. Mass frustration erupted. Amidst high youth unemployment […]

The post Amidst the Pandemic, A Battle for Inclusion appeared first on Ideas Matter.

The unprecedented conditions created by the spread of the coronavirus call for exceptional policy responses from the regional monetary authorities. Besides traditional tools such as interest rate reductions, central banks have been pursuing unconventional measures to avoid permanent consequences from a transitory, but potentially severe, negative shock. Since the 2008 global financial crisis, central banks […]

The post What Can Central Banks Do to Mitigate the Effects of the Coronavirus? appeared first on Ideas Matter.

The novel coronavirus and the disease it causes, Covid-19, have imposed severe human and economic costs around the world. Cases are growing in Latin America and the Caribbean and if there is one lesson from other countries it is that early action to stop the spread of the virus is key. A recent analysis suggests […]

The post Policies and Projections for Latin America and the Caribbean in the Time of Covid-19 appeared first on Ideas Matter.

By Alan Finkelstein Shapiro and Victoria Nuguer Registering a business in Latin America is not for the faint of heart. Multiple procedures  — ranging from establishing by-laws and a legal structure to registering the company with authorities — have to be carried out. Labyrinthine bureaucracies have to be negotiated. Lawyers and accountants are often hired to avoid […]

The post When Lower Barriers to Firm Creation Translate Into More Resilient Economies appeared first on Ideas Matter.

As the chair of the United States Federal Reserve from 2006-2014, Ben Bernanke liked to say that monetary policy is 98% talk and only two percent action. In other words, what the central bank says is hugely important. It can affect households, firms, and market expectations, and, in turn, impact the economy. That message could not […]

The post Fighting Inflation With Better Communication appeared first on Ideas Matter.

Before the financial crisis of 2008, most governments lacked an institutional framework for handling financial policy. Central banks focused on monetary policy. They mostly used interest rates to influence inflation and output, believing such a focus could guarantee economic stability. But when it came to financial policy they were inclined to trust the invisible hand […]

The post When Focusing on the Interest Rate is Not Enough appeared first on Ideas Matter.

Firms in the developed world rely heavily on bank credit. But firms in developing countries, and particularly those in Latin America, rely much more heavily on trade credit–i.e. credit from their suppliers –and that has immense implications for pricing decisions and inflation. Most studies that have looked at inflation in emerging economies have examined the […]

The post How the Financing of Firms Affects Prices appeared first on Ideas Matter.

How can emerging markets protect themselves from abrupt shifts in cross-border banking flows? That has been a fundamental question for economic policymakers in recent years, including those entrusted with banking supervision in regions like Latin America and the Caribbean. In a study made available online in May, Gabriel Cuadra and I examine the issue, focusing […]

The post Reducing Volatility from Cross-Border Banking Flows appeared first on Ideas Matter.

They have risen bit by bit. But since the financial crisis in 2008, the Fed has kept interest rates in the United States exceedingly low. Now with healthier economic growth and employment in the United States, that may be changing, and Latin American countries need to be on their guard. Latin America’s major economies have […]

The post Dealing with Corporate Debt and Rising Interest Rates appeared first on Ideas Matter.