External Conditions and Debt Sustainability in Latin America

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

In a context of highly favorable external conditions, 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 factors on key domestic variables... (see full summary)

 
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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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