RESEARCH DEPARTMENT
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The IDB has researchers in many departments producing working papers on economic and social topics. Many of these documents constitute background research for the IDB’s flagship publication "Development in the Americas" prepared by the Research Department. In addition, the IDB finances and mentors studies conducted by other institutions in order to build knowledge and research capacity. All IDB working papers are peer reviewed and meet high editorial standards.

DIA 2021: TRUST - The Key to Social Cohesion and Growth in Latin America and the Caribbean

TRUST The Key to Social Cohesion and Growth in Latin America and the Caribbean

Edited by Philip Keefer and Carlos Scartascini

  • Trust is a tremendous opportunity for countries in Latin America and the Caribbean. By making trust a goal of public policy, and not simply its byproduct, countries can accelerate growth and employment. Decisions to invest, employ, produce, buy, or sell all depend on trust. The most productive, skilled, and innovative individuals have greater economic opportunities in high-trust societies. Greater trust will unleash growth.
  • Mistrust in the private sector is an obstacle to inclusive growth. It is well known that the business sector tends to distrust governments, and this hurts investment and productivity. A survey of thousands of export-oriented firms in the region reveals that distrust within firms is also an obstacle to investment and innovation.
  • Mistrust in the public sector is an obstacle to inclusive growth. Trust in governments is low in the region. Our study finds that the lack of trust makes it difficult for citizens to demand better public policies and services. A survey of thousands of public officials revealed that mistrust within public agencies, and their mistrust of citizens, reduces public sector capacity to serve citizen needs.
  • Restoring trust depends on information and empowerment. Citizens do not trust government when they are uninformed about what government is doing for them, and when they have little capacity to act together to hold government accountable. Firms do not trust each other when they can do little about opportunistic behavior. Governments should inform and empower to restore trust.

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2021 LATIN AMERICAN AND CARIBBEAN MACROECONOMIC REPORT: Opportunities for Stronger and Sustainable Postpandemic Growth

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Coordinated by Eduardo Cavallo and Andrew Powell

  • Latin America and the Caribbean was hard hit by COVID-19. The 7.4% loss of GDP was the largest on record in a single year, 26 million jobs were lost and (extreme and moderate) poverty is expected to rise by about 5 percentage points of the population. Growth in 2021 could be as low as 0.8% if vaccine roll-out is delayed or mutations prove to be vaccine resistant. But in a positive scenario of higher world growth, the region could grow as much as 5.2%. In a central scenario growth would be around 4.1%.

  • The average fiscal package to address the crisis was 8.5% of GDP and deficits increased by an average of 5.3% of GDP in 2020. Public debt increased from 58% of GDP in 2019 to 72% in 2020 and could continue to rise to 76% by 2023. However, the trajectory is highly dependent on growth and fiscal policy.

  • Governments should take action to ensure fiscal, monetary, and financial sustainability. They should also implement a set of urgent reforms to improve fiscal outcomes and boost growth by assisting viable firms, helping workers find formal jobs in the face of reallocation, improving connectivity, implementing a plan towards faster digitalization, and investing in sustainable infrastructure. These measures will help boost productivity, spur growth, and achieve ambitious climate goals.

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LATEST BLOG POSTS

Reactivating the Economy with Better Business and Household Credit
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As the economies of Central America, Mexico, Panama and the Dominican Republic contracted steeply in 2020 in the face of COVID-19, their governments and central banks rose to face unprecedented challenges in maintaining liquidity and credit and keeping businesses and households afloat. They set lower policy rates and reserve requirements, devised more flexible regulations for […]

The post Reactivating the Economy with Better Business and Household Credit appeared first on Ideas Matter.

Boosting Trade to Alleviate Pressures from the Russia-Ukraine Conflict
Boosting Trade to Alleviate Pressures from the Russia-Ukraine Conflict

When war broke out between Russia and Ukraine at the end of February, businesses and governments in Latin America and the Caribbean worried that the war’s disruptions would cause significant harm to the region’s trade. What now seems clear is that rather than being deeply harmed, Latin America and the Caribbean has a significant opportunity […]

The post Boosting Trade to Alleviate Pressures from the Russia-Ukraine Conflict appeared first on Ideas Matter.

Achieving Climate Change Goals Means Redirecting 7 to 19% of GDP Worth of Spending Decisions
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The post Achieving Climate Change Goals Means Redirecting 7 to 19% of GDP Worth of Spending Decisions appeared first on Ideas Matter.

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