External Conditions and Debt Sustainability in Latin America

• Author: Gustavo Adler and Sebastian Sosa
• Pages: 1-7

IMFIMF

Volume 14, Number 3 September 2013

www.imf.org/researchbulletin

B U L L E T I N

1

Monetary Policy Cyclicality in

Emerging Markets

Donal McGettigan, Kenji Moriyama, and Chad Steinberg

Does monetary policy help

smooth or amplify economic

cycles? In most advanced mar-

kets monetary policy helps

smooth cycles. However, for

emerging markets, procycli-

cal monetary policy has been a problem, with macroeconomic policies amplifying

economic upswings and deepening downturns. This article summarizes research

in this area, focusing on monetary policy. Key findings in the research include: (i)

Emerging markets have adopted increasingly countercyclical monetary policy over

time, although large differences remain among emerging markets and policies became

more procyclical during the recent crisis, and (ii) inflation targeting and better insti-

tutions have been key factors behind the move to countercyclicality. In our research

we confirm these findings using a comprehensive dataset and we also find that more

countercyclical policy is associated with far less volatile output.

External Conditions and Debt Sustainability

in Latin America

Gustavo Adler and Sebastian Sosa

In a context of highly favorable external condi-

tions, especially for commodity exporters, Latin

America´s fiscal and external fundamentals

improved markedly over the last decade. But,

how dependent are these gains on a continuation

of such conditions? To address this question, we

develop a framework that integrates econometric estimates of the effect of global fac-

tors on key domestic variables that determine debt dynamics, and use this framework

to assess debt sustainability under less favorable external scenarios.

Over the last decade, a nd especially during the 20 03–08 period, Latin America

experienced a remarkable improvement in key macroec onomic fundamentals,

reducing public and externa l debt ratios, accumulating foreign assets , strength-

ening scal a nd external current account balances , and reducing debt structure

vulnerabil ities. While prudent policies played an importa nt role, much of these

In This Issue

1 External Conditions and

Debt Sustainability

in Latin America

1 Monetary Policy

Cyclicality in Emerging

Markets

5 Q&A: Seven Questions on

Macroprudential Policy

Frameworks

11 IMF Working Papers

14 Fourteenth Jacques

Polak Annual Research

Conference

15 New Impact Factor for

IMF Economic Review

15 Staff Discussion Notes

16 Recommended Readings

from the IMF Bookstore

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Research Summaries

(continued on page 8)