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Prepared by Patrick Blagrave, Eugenio Cerutti, Ewa Gradzka, Anna Ivanova, Rodrigo Mariscal, and Jaume Puig-Forné.
CAPDR countries include Costa Rica, Nicaragua, Honduras, El Salvador, the Dominican Republic, Panama, and Guatemala.
The full list of countries included the UK, Germany, France, Italy, Russia, Japan, China, India, South Korea, the U.S., Canada, Brazil, Mexico, Honduras, Guatemala, El Salvador, the Dominican Republic, Costa Rica, Nicaragua, and Panama.
The assumptions on fiscal multipliers for larger countries come from the empirical literature (see Ivanova and Weber 2011 for detail), for Central American countries multipliers were assumed in line with those for the U.S. with average revenue/expenditure multiplier in the first year of about 0.3.
For methodological details see Cerutti, Eugenio, Stijn Claessens, and Patrick McGuire, 2012, “Systemic Risks in Global Banking: What can Available Data Tell Us and What More Dare are Needed?” BIS Working Paper 376, Bank for International Settlements.
Bank recapitalizations as well as other remedial policy actions (e.g., ring fencing, monetary policy, etc.) at the host and/or home country level are not assumed.
Panamanian banks have a more limited integration in the network analysis as they merely transmit the stress in international banks, rather than also being subjected to stress scenarios of losses in their asset values.
Based on consolidated claims on Costa Rica of BIS reporting banks—excluding domestic deposits of subsidiaries of these banks in Costa Rica.
Total credit to the non-bank sectors in Costa Rica is calculated by adding IFS local (both domestic and foreign owned) banks’ claims on non-bank borrowers and BIS reporting banks’ direct cross-border claims on non-bank sectors (BIS Locational Banking Statistics Table 6B).
The sample covers the period from January 2013 to January 2014 in eleven Latin American countries, including six from Central America (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras and Panama), as well as Brazil, Chile, Colombia, Mexico, and Peru.
The International Country Risk Guide (ICRG) database maintained by the PRS Group provides a monthly composite country risk index that summarizes political, financial and economic conditions in a range of developed and emerging market countries. Sub-components of the index include GDP growth, inflation, fiscal and current account balances, external debt, official reserves, exchange rate volatility, as well as other measures of socioeconomic conditions, law and order, and democratic accountability.