Ms. Kimberly Beaton, Mr. Roberto Garcia-Saltos, and Mr. Lorenzo U Figliuoli
Abstract: Accelerating economic growth in Central America, Panama and the Dominican Republic (CAPDR) remains an elusive task. While the region performed relatively well in the post-global financial crisis period, over the last five years obstacles to growth have become more evident and new challenges have emerged. In response, the region has strengthened macro-financial frameworks but more progress will be required to pave the way to sustained growth and prosperity. This book considers the structural factors underlying the region’s growth outlook and assesses its macroeconomic and financial challenges to help shape the policy agenda going forward. The book first identifies the structural determinants of growth in the region related to: capital formation; employment; demographic factors, including immigration; productivity; and violence. It then highlights the importance of creating fiscal space through the design and implementation of fiscal rules and mechanisms to increase accountability (better quality of public spending, adequate policies to reduce income inequality and sustainable retirement plans). Finally, it presents recent evidence on the importance of a supportive financial sector for growth (including through financial inclusion and development).
The first part of the book examines the evolution of monetary policy and prudential frameworks of the ASEAN5, with particular focus on changes since the Asian financial crisis and the more recent period of unconventional monetary policy in advanced economies. The second part of the book looks at policy responses to global financial spillovers. The third and last part of the book elaborates on the challenges ahead for monetary policy, financial stability frameworks, and the deepening of financial markets.
Since 2008, economic policymakers and researchers have occupied a brave new economic world. Previous consensuses have been upended, former assumptions have been cast into doubt, and new approaches have yet to stand the test of time. Policymakers have been forced to improvise and researchers to rethink basic theory. George Akerlof, Nobel Laureate and one of this volume’s editors, compares the crisis to a cat stuck in a tree, afraid to move. In April 2013, the International Monetary Fund brought together leading economists and economic policymakers to discuss the slowly emerging contours of the macroeconomic future. This book offers their combined insights.
The contributors consider the lessons learned from the crisis and its aftermath. They discuss, among other things, post-crisis questions about the traditional policy focus on inflation; macroprudential tools (which focus on the stability of the entire financial system rather than of individual firms) and their effectiveness; fiscal stimulus, public debt, and fiscal consolidation; and exchange rate arrangements.
Metodij Hadzi-Vaskov, Mr. Javier Kapsoli, and Mr. Bogdan Lissovolik
Policy efforts to strengthen fiscal prudence, gain credibility, and ensure fiscal sustainability have long been priorities for policymakers in CAPDR countries. Some countries in the region have introduced fiscal responsibility frameworks to meet these objectives, while others are considering similar legal structures. Taking stock of the main characteristics and results so far, both in CAPDR and in other emerging market economies, reveals key challenges for countries considering embarking on the journey to fiscal responsibility.
Cristhian Vera, PraChi Mishra, and Rogelio Morales
The views expressed in this chapter are those of the authors and do not necessarily represent those of the IMF or its Board of Directors. This chapter represents an application of Mishra, Montiel, and Spilimbergo (2012) to the Central America, Panama, and the Dominican Republic (CAPDR) countries.
Kimberly beaton, Mr. Mario Dehesa, Mr. Fernando L Delgado, and Xiaodan Ding
Financial stability is key to inclusive and sustained growth. Financial crises frequently result in large output and wealth losses, and they tend to affect people in middle- and lower-middle classes harder than the wealthy, sapping broad-based economic growth. Without remedies against the often severe consequences of financial crises, prevention is better than cures that deal with their impact after the event. To mitigate the financial stability risks that emanate from financial institutions, countries have traditionally relied on prudential regulations and more recently on risk-based supervision to buffer financial shocks. However, risks to systemic stability can also stem from real sector shocks. As seen during the global financial crisis of 2008, cross-border and cross-sector spillovers can intensify both.