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Abstract

Despite some global risks, external conditions for Latin America should remain stimulative. With monetary policy in advanced economies expected to stay accommodative, external financing conditions will remain favorable. Strong demand from emerging Asian economies and the gradual recovery of advanced economies will continue to support commodity prices, benefiting exporters. The main policy challenge for most of the region is to take advantage of current conditions to continue buttressing a foundation for sustained growth. Other issues important to the region include: (i) strengthening balance sheets; (ii) understanding how changes in external conditions could impact public and external debt dynamics; and (iii) making the best use of the windfall from the recent terms-of-trade boom.

References

  • Adler, G., and N. Magud, 2013, “Four Decades of Terms-of-Trade Booms: A New Metric of Income Windfall and Saving Investment Patterns,” IMF Working Paper, forthcoming (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Adler, G., and S. Sosa, 2013, “External Conditions and Debt Sustainability in Latin America,” IMF Working Paper No. 13/27 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Acevedo, S., A. Cebotari, K. Greenidge, G. Kim, M. Mrkaic, and S. Snudden, 2013, “Caribbean: In Search of Lost Competitiveness,” forthcoming IMF Working Paper (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Barro, Robert, and Jong-Wha Lee, 2010, “A New Data Set of Educational Attainment,” NBER Working Paper No. 15902 (Cambridge, Massachusetts: National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation
  • Bils, Mark, and Peter J. Klenow, 2000, “Does Schooling Cause Growth?American Economic Review, Vol. 90, No. 5, pp. 116083.

  • Carroll, C., J. Slacalek, and M. Sommer, 2012, “Dissecting Saving Dynamics: Measuring Wealth, Precautionary, and Credit Effects,” IMF Working Paper No. 12/219 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Celasun, O., D. Cooper, J. Dagher, and R. Giri, 2012, “U.S. Household Wealth and Saving: The Micro Story Behind the Macro Dynamics,” in United States—Selected Issues, IMF Country Report No. 12/214 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Céspedes, L.F., and A. Velasco, 2011, “Was This Time Different?: Fiscal Policy in Commodity Republics,” BIS Working Papers No. 365 (Basel: Bank for International Settlements).

    • Search Google Scholar
    • Export Citation
  • Ferreira, Pedro Cavalcanti, Samuel De Abreu Pessoa, and Fernando A. Leloso, 2013, “On the Evolution of Total Factor Productivity in Latin America,” Economic Inquiry, Vol. 51, No. 1, pp. 1630.

    • Search Google Scholar
    • Export Citation
  • Gollin, Douglas, 2002, “Getting Income Shares Right,” Journal of Political Economy, Vol. 110, No. 2, pp. 45874.

  • Gonzalez-Miranda, Maria, 2012, “Nonfinancial Firms in Latin America: A Source of Vulnerability?IMF Working Paper No. 12/279 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Hatchondo, J.C., L. Martinez, and F. Roch, 2012, “Fiscal Rules and the Sovereign Default Premium,” IMF Working Paper No. 12/30 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Hatchondo, J.C., L. Martinez, and F. Roch, 2011, “Debt Dilution and Sovereign Default Risk,” IMF Working Paper No. 11/70 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Heston, Alan, Robert Summers, and Bettina Aten, 2012, Penn World Table Version 7.1, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, July.

    • Search Google Scholar
    • Export Citation
  • Inter-American Development Bank, 2008, All that Glitters May Not Be Gold. Assessing Latin America’s Recent Macroeconomic Performance, Annual Report (Washington: Inter-American Development Bank).

    • Search Google Scholar
    • Export Citation
  • Inter-American Development Bank, 2010, The Age of Productivity: Transforming Economies from the Bottom Up (Washington: Inter-American Development Bank).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2002, Assessing Sustainability (Washington: International Monetary Fund). Available at: www.imf.org/external/np/pdr/sus/2002/eng/052802.pdf

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2003, Sustainability Assessments-Review of Application and Methodological Refinements (Washington: International Monetary Fund). Available at: www.imf.org/external/np/pdr/sustain/2003/061003.pdf

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2005, Information Note on Modifications to the Fund’s Debt Sustainability Assessment Framework for Market Access Countries (Washington: International Monetary Fund). Available at: www.imf.org/external/np/pp/eng/2005/070105.pdf

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2011, Modernizing the Framework for Fiscal Policy and Public Debt Sustainability Analysis (Washington: International Monetary Fund). Available at: www.imf.org/external/np/pp/eng/2011/080511.pdf

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2012a, Macroeconomic Policy Frameworks for Resource-Rich Developing Countries (Washington: International Monetary Fund). Available at: www.imf.org/external/np/pp/eng/2012/082412.pdf

    • Search Google Scholar
    • Export Citation
  • Rendak, N., A. Giddings, C. DeLong, Y. Liu, M. Luedersen, and F. Chukwu, 2012b, “United States Foreclosure Crisis: Can Modification of the Personal Bankruptcy Framework Facilitate Residential Mortgage Restructuring?in United States—Selected Issues, IMF Country Report No. 12/214.

    • Search Google Scholar
    • Export Citation
  • Izquierdo, A., R. Romero, and E. Talvi, 2008, “Booms and Busts in Latin America: The Role of External Factors,” Research Department Working Paper No. 631 (Washington: Inter-American Development Bank).

    • Search Google Scholar
    • Export Citation
  • Kamil, H., and J. Zook, 2012, “What Explains Mexico’s Recovery of U.S. Market Share?in Mexico—Selected Issues, IMF Country Report No. 12/317 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Kohli, U., 2004, “Real GDP, Real Domestic Income, and Terms-of-Trade Changes,” Journal of International Economics, No. 62, pp. 83106.

    • Search Google Scholar
    • Export Citation
  • Loayza, Norman, Pablo Fajnzylber, and César Calderón, 2005, Economic Growth in Latin America and the Caribbean: Stylized Facts, Explanations, and Forecasts (Washington: World Bank).

    • Search Google Scholar
    • Export Citation
  • Magud, N. E., and E. Tsounta, 2012, “To Cut or Not to Cut? That is the (Central Bank’s) Question. In Search of the Neutral Interest Rate in Latin America,” IMF Working Paper No. 12/243 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Medas, P., and Y. Dai, 2012, “Canada’s Loss of External Competitiveness: The Role of Commodity Prices and the Emergence of China,” in Canada—Selected Issues, IMF Country Report No. 13/41 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Österholm, P., and J. Zettelmeyer, 2008, “The Effect of External Conditions on Growth in Latin America,” IMF Staff Papers, Vol. 55, No. 4, pp. 595623.

    • Search Google Scholar
    • Export Citation
  • Schaechter, A., T. Kinda, N. Budina, and A. Weber, 2012, “Fiscal Rules in Response to the Crisis: Toward the Next-Generation Rules. A New Dataset,” IMF Working Paper No. 12/187 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Sosa, S., and E. Tsounta, 2013, “Labor Productivity and Potential Growth in Latin America: A Post Crisis AssessmentIMF Working Paper, forthcoming (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Sosa, S., E. Tsounta, and H. S. Kim, 2013, “Is the Growth Momentum in Latin America Sustainable?IMF Working Paper, forthcoming (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

New Publications from the Western Hemisphere Department, May 2012–April 2013

1. IMF Working Papers

WP/13/40 – Growth and Employment in the Dominican Republic: Options for a Job-Rich Growth, by Umidjon Abdullaev and Marcello Estevão.

WP/13/27 – External Conditions and Debt Sustainability in Latin America, by Gustavo Adler and Sebastián Sosa.

WP/12/301 – The Determinants of Banks’ Liquidity Buffers in Central America, by Corinne Delechat, Camila Henao Arbelaez, Priscilla Muthoora, and Svetlana Vtyurina.

WP/12/279 – Nonfinancial Firms in Latin America: A Source of Vulnerability? by Maria Gonzalez.

WP/12/276 – The Challenges of Fiscal Consolidation and Debt Reduction in the Caribbean, by Charles Amo-Yartey, Machiko Narita, Garth Peron Nicholls, Joel Chiedu Okwuokei, Alexandra Peter, and Therese Turner-Jones.

WP/12/261 – Performance of Publicly Listed Chilean Firms During the 2008–09 Global Financial Crisis, by Yi Wu.

WP/12/254 – Financial Spillovers to Chile, by Jiri Podpiera.

WP/12/245 – Natural Disasters: Mitigating Impact, Managing Risks, by Nicole Laframboise and Boileau Loko.

WP/12/243 – To Cut or Not to Cut? That is the (Central Bank’s) Question - In Search of the Neutral Interest Rate in Latin America, by Nicolas E. Magud and Evridiki Tsounta.

WP/12/235 – Caribbean Growth in an International Perspective: The Role of Tourism and Size, by Nita Thacker, Sebastian Acevedo, and Roberto Perrelli.

WP/12/234 – Central America, Panama, and the Dominican Republic: Trade Integration and Economic Performance, by Stephanie Medina Cas, Andrew Swiston, and Luis-Diego Barrot.

WP/12/225 – Inflation Responses to Commodity Price Shocks–How and Why Do Countries Differ? by Gaston Gelos and Yulia Ustyugova.

WP/12/224 – Brazil’s Capital Market: Current Status and Issues for Further Development, by Joonkyu Park.

WP/12/219 – Dissecting Saving Dynamics: Measuring Wealth, Precautionary, and Credit Effects, by Christopher Carroll, Jiri Slacalek, and Martin Sommer.

WP/12/193 – Latin America: Vulnerabilities under Construction? By Luis Cubeddu, Camilo E. Tovar, and Evridiki Tsounta.

WP/12/188 – Riding Global Financial Waves: The Economic Impact of Global Financial Shocks on Emerging Market Economies, by Gustavo Adler and Camilo E. Tovar.

WP/12/178 – Intertwined Sovereign and Bank Solvencies in a Model of Self-Fulfilling Crisis, by Gustavo Adler.

WP/12/157 – Threshold Effects of Sovereign Debt: Evidence from the Caribbean, by Kevin Greenidge, Roland Craigwell, Chrystol Thoma, and Lisa Drakes.

WP/12/155 – Banks’ Liability Structure and Mortgage Lending During the Financial Crisis, by Jihad C. Dagher and Kazim Kazimov.

WP/12/145 – Intra-Regional Spillovers in South America: Is Brazil Systemic after All? by Gustavo Adler and Sebastián Sosa.

WP/12/142 – Credit Growth and the Effectiveness of Reserve Requirements and Other Macroprudential Instruments in Latin America, by Camilo E. Tovar, Mercedes Garcia-Escribano, and Mercedes Vera Martin.

WP/12/124 – Do Dynamic Provisions Enhance Bank Solvency and Reduce Credit Procyclicality? A Study of the Chilean Banking System, by Jorge A. Chan-Lau.

WP/12/112 – Commodity Price Shocks and Fiscal Outcomes, by Nikola Spatafora and Issouf Samake.

WP/12/110 – Dynamic Loan Loss Provisioning: Simulations on Effectiveness and Guide to Implementation, by Torsten Wezel, Jorge A. Chan-Lau, and Francesco Columba.

2. Selected Issues Papers

Brazil

  • Macroeconomic Implications of Pension Reform in Brazil, Joana Pereira.

  • Real Exchange Rate Appreciation: Can Fiscal Policy Help? Marialuz Moreno Badia and Alex Segura-Ubiergo.

  • Consumer Credit Growth and Risks for Household Financial Stress, Mercedes García-Escribano.

Canada

  • Is There an Excess Supply of Housing in Canada? Julien Reynaud.

  • Recent Experience with Macro-Prudential Tools in Canada: Effectiveness and Options Moving Forward, Ivo Krznar and Pablo Medas.

  • Canada’s Loss of External Competitiveness: The Role of Commodity Prices and the Emergence of China, Pablo Medas.

Caribbean

  • Credit Unions in the ECCU: Prospects and Challenges, Y. Wong and A. Lemus.

  • Macroeconomic Statistics in the ECCU, S. Benjamin, A. Brousseau, H. Corbin, M. Mrkaic, and L. Sahely.

Chile

  • Output Fluctuations in Chile—The Role of External Factors, Sebastián Sosa.

  • Financial Spillovers to Chile, Jiri Podpiera.

  • Performance of Publicly Listed Chilean Firms during the 2008–09 Global Financial Crisis, Yi Wu.

Costa Rica

  • International Spillovers, Yulia Ustyugova.

  • Potential Estimates, Yulia Ustyugova.

  • Assessing Fiscal Vulnerability and Medium-Term Sustainability, Pablo Morra.

  • Basel III and Coasta Rica’s Banking System, Fernando Delgado.

Haiti

  • A Renewed Public Investment Policy in Support of Growth and Poverty Reduction, Abdel Bessaha.

Mexico

  • What Explains Mexico’s Recovery of U.S. Market Share? Herman Kamil and Jeremy Zook.

  • The Case for Tax Revenue Mobilization in Mexico, Santiago Acosta-Ormaechea.

  • Mexico: Financial Sector Development, Francisco Vázquez Ahued and Esteban Vesperoni.

  • Mexico: Migration and Labor Markets, Enrique Flores and Esteban Vesperoni.

Nicaragua

  • Raising Potential Output: The Challenge of Inclusive Growth, Christian Johnson.

  • Lifting a Constraint on Growth: Achievements and Challenges of Nicaragua’s Electricity Sector, Gabriel Di Bella.

  • Fiscal Consolidation–Issues and Policy Options, Issouf Samake.

Panama

  • Panama: Taking Stock of a Decade of Tax Reforms, Svetlana Vtyurina.

Paraguay

  • Credit Booms: Relaxing Constraints During Capital Inflow Booms, Nicolas E. Magud.

  • External Financial Shocks: How Important for Paraguay? Jiri Podpiera and Volodymyr Tulin.

Peru

  • Institutional Framework for Macroprudential Policy, M. Vera Martin.

  • Advances and Challenges in Social Policies, Yu Ching Wong.

  • Fiscal Objectives: Lower Debt or Higher Savings? M. Vera Martin.

  • Trade Evolution and Policy Challenges, Yu Ching Wong.

  • Banking Sector Spreads, Kevin Ross.

Trinidad and Tobago

  • The Heritage and Stabilization Fund: Key Issues for the 2012 Review, Joel Okwuokei, Hunter Monroe, and Judith Gold.

  • Developments and Prospects in the Energy Sector, Machiko Narita and Judith Gold.

United States

  • U.S. Household Wealth and Saving: The Micro Story Behind the Macro Dynamics, Oya Celasun, Daniel Cooper, Jihad Dagher, and Rahul Giri.

  • The Residential Construction Sector: When Will it Emerge from its Rubble? Jihad Dagher and Julien Reynaud.

  • Output Losses Following Financial Crises—A Sensitivity Analysis, Geoffrey Keim, Oya Celasun, and Martin Sommer.

  • Is Long-Term Unemployment Pushing Up Structural Unemployment? Eric Le Borgne.

  • Collapse
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  • Adler, G., and N. Magud, 2013, “Four Decades of Terms-of-Trade Booms: A New Metric of Income Windfall and Saving Investment Patterns,” IMF Working Paper, forthcoming (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Adler, G., and S. Sosa, 2013, “External Conditions and Debt Sustainability in Latin America,” IMF Working Paper No. 13/27 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Acevedo, S., A. Cebotari, K. Greenidge, G. Kim, M. Mrkaic, and S. Snudden, 2013, “Caribbean: In Search of Lost Competitiveness,” forthcoming IMF Working Paper (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Barro, Robert, and Jong-Wha Lee, 2010, “A New Data Set of Educational Attainment,” NBER Working Paper No. 15902 (Cambridge, Massachusetts: National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation
  • Bils, Mark, and Peter J. Klenow, 2000, “Does Schooling Cause Growth?American Economic Review, Vol. 90, No. 5, pp. 116083.

  • Carroll, C., J. Slacalek, and M. Sommer, 2012, “Dissecting Saving Dynamics: Measuring Wealth, Precautionary, and Credit Effects,” IMF Working Paper No. 12/219 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Celasun, O., D. Cooper, J. Dagher, and R. Giri, 2012, “U.S. Household Wealth and Saving: The Micro Story Behind the Macro Dynamics,” in United States—Selected Issues, IMF Country Report No. 12/214 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Céspedes, L.F., and A. Velasco, 2011, “Was This Time Different?: Fiscal Policy in Commodity Republics,” BIS Working Papers No. 365 (Basel: Bank for International Settlements).

    • Search Google Scholar
    • Export Citation
  • Ferreira, Pedro Cavalcanti, Samuel De Abreu Pessoa, and Fernando A. Leloso, 2013, “On the Evolution of Total Factor Productivity in Latin America,” Economic Inquiry, Vol. 51, No. 1, pp. 1630.

    • Search Google Scholar
    • Export Citation
  • Gollin, Douglas, 2002, “Getting Income Shares Right,” Journal of Political Economy, Vol. 110, No. 2, pp. 45874.

  • Gonzalez-Miranda, Maria, 2012, “Nonfinancial Firms in Latin America: A Source of Vulnerability?IMF Working Paper No. 12/279 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Hatchondo, J.C., L. Martinez, and F. Roch, 2012, “Fiscal Rules and the Sovereign Default Premium,” IMF Working Paper No. 12/30 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Hatchondo, J.C., L. Martinez, and F. Roch, 2011, “Debt Dilution and Sovereign Default Risk,” IMF Working Paper No. 11/70 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Heston, Alan, Robert Summers, and Bettina Aten, 2012, Penn World Table Version 7.1, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, July.

    • Search Google Scholar
    • Export Citation
  • Inter-American Development Bank, 2008, All that Glitters May Not Be Gold. Assessing Latin America’s Recent Macroeconomic Performance, Annual Report (Washington: Inter-American Development Bank).

    • Search Google Scholar
    • Export Citation
  • Inter-American Development Bank, 2010, The Age of Productivity: Transforming Economies from the Bottom Up (Washington: Inter-American Development Bank).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2002, Assessing Sustainability (Washington: International Monetary Fund). Available at: www.imf.org/external/np/pdr/sus/2002/eng/052802.pdf

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2003, Sustainability Assessments-Review of Application and Methodological Refinements (Washington: International Monetary Fund). Available at: www.imf.org/external/np/pdr/sustain/2003/061003.pdf

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2005, Information Note on Modifications to the Fund’s Debt Sustainability Assessment Framework for Market Access Countries (Washington: International Monetary Fund). Available at: www.imf.org/external/np/pp/eng/2005/070105.pdf

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2011, Modernizing the Framework for Fiscal Policy and Public Debt Sustainability Analysis (Washington: International Monetary Fund). Available at: www.imf.org/external/np/pp/eng/2011/080511.pdf

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2012a, Macroeconomic Policy Frameworks for Resource-Rich Developing Countries (Washington: International Monetary Fund). Available at: www.imf.org/external/np/pp/eng/2012/082412.pdf

    • Search Google Scholar
    • Export Citation
  • Rendak, N., A. Giddings, C. DeLong, Y. Liu, M. Luedersen, and F. Chukwu, 2012b, “United States Foreclosure Crisis: Can Modification of the Personal Bankruptcy Framework Facilitate Residential Mortgage Restructuring?in United States—Selected Issues, IMF Country Report No. 12/214.

    • Search Google Scholar
    • Export Citation
  • Izquierdo, A., R. Romero, and E. Talvi, 2008, “Booms and Busts in Latin America: The Role of External Factors,” Research Department Working Paper No. 631 (Washington: Inter-American Development Bank).

    • Search Google Scholar
    • Export Citation
  • Kamil, H., and J. Zook, 2012, “What Explains Mexico’s Recovery of U.S. Market Share?in Mexico—Selected Issues, IMF Country Report No. 12/317 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Kohli, U., 2004, “Real GDP, Real Domestic Income, and Terms-of-Trade Changes,” Journal of International Economics, No. 62, pp. 83106.

    • Search Google Scholar
    • Export Citation
  • Loayza, Norman, Pablo Fajnzylber, and César Calderón, 2005, Economic Growth in Latin America and the Caribbean: Stylized Facts, Explanations, and Forecasts (Washington: World Bank).

    • Search Google Scholar
    • Export Citation
  • Magud, N. E., and E. Tsounta, 2012, “To Cut or Not to Cut? That is the (Central Bank’s) Question. In Search of the Neutral Interest Rate in Latin America,” IMF Working Paper No. 12/243 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Medas, P., and Y. Dai, 2012, “Canada’s Loss of External Competitiveness: The Role of Commodity Prices and the Emergence of China,” in Canada—Selected Issues, IMF Country Report No. 13/41 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Österholm, P., and J. Zettelmeyer, 2008, “The Effect of External Conditions on Growth in Latin America,” IMF Staff Papers, Vol. 55, No. 4, pp. 595623.

    • Search Google Scholar
    • Export Citation
  • Schaechter, A., T. Kinda, N. Budina, and A. Weber, 2012, “Fiscal Rules in Response to the Crisis: Toward the Next-Generation Rules. A New Dataset,” IMF Working Paper No. 12/187 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Sosa, S., and E. Tsounta, 2013, “Labor Productivity and Potential Growth in Latin America: A Post Crisis AssessmentIMF Working Paper, forthcoming (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Sosa, S., E. Tsounta, and H. S. Kim, 2013, “Is the Growth Momentum in Latin America Sustainable?IMF Working Paper, forthcoming (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation