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What are the sources of structural volatility in Latin America? To address this question, Macroeconomic Volatility in Reformed Latin America focuses on the factors responsible for macroeconomic instability in three Latin American economies: Argentina, Mexico, and Chile. It finds that volatility in these countries can largely be traced to two critical weaknesses: weak links with international financial markets and underdeveloped domestic financial markets. Using the case studies, Ricardo J. Caballero outlines a framework that serves not only to explain aggregate volatility in other parts of the world, but is also relevant in designing policy to reduce the frequency and magnitude of new shocks.
After decades using monetary aggregates as the main instrument of monetary policy and having different varieties of crawling peg exchange rate regimes, Colombia adopted a full-fledged inflation-targeting (IT) regime in 1999, with inflation as the nominal anchor, a floating exchange rate, and the short-term interest rate as the main instrument. This paper examines the experience of the Colombian Ce ... (View publication)
Access to capital is crucial for economic development. In many developing nations, however, high default rates present a serious obstacle to the creation of efficient capital markets. Defusing Default examines the problem of default in various countries throughout the Americas as well as public and private means of encouraging repayment of debts. Encompassing theoretical approaches and empirical d ... (View publication)
Financial liberalization has not lived up to expectations, at least as far as interest rate spreads are concerned. Over the past decade, many countries in Latin America and the Caribbean have reformed their financial sectors and reaped major economic benefits as a result. However, the persistence of high interest rate spreads -the difference between the interest charged to borrowers and the rate p ... (View publication)
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