Rafael Di Tella, Lucía Freira, Ramiro Gálvez, Ernesto Schargrodsky, Diego Shalom, Mariano Sigman, 16 January 2018

Governments in Latin America seemingly go unpunished at election times for high crime rates. This column examines whether the region’s high tolerance for crime is the result of ‘desensitisation’, with people reacting less to crime the more they are exposed to it. It finds that victims of crime become desensitised compared with non-victims, helping to explain tolerance to crime and a weak relationship between crime and happiness in high-crime areas.

Leonardo Gasparini, Guillermo Cruces, Sebastian Galiani, Pablo Acosta, 05 January 2018

While income dispersion significantly increased over the 1990s in most Latin American countries, the 2000s were characterised by a widespread fall in socioeconomic and labour disparities. This column uses a supply-demand framework to explore changes in labour market returns to education in the region. The relative supply of skilled labour rose consistently over the period, while the wage skill premium rose then fell. Supply-side factors seem less important than demand-side factors in accounting for changes in the skill premium, especially between workers with a tertiary education and the rest.

Andrew Powell, 25 November 2017

The recent interest rate rise in the UK occurred despite negative economic news. This is not what conventional inflation-targeting policy would imply. This column argues that recent Latin American experience suggests the theory underlying inflation targeting may need to be reconsidered. Specifically, for small open economies, the role of the exchange rate and inflation expectations should be considered when deciding how to react. 

Sebastian Galiani, 23 November 2017

Joshua Aizenman, Yothin Jinjarak, Jungsuk Kim, Donghyun Park, 08 January 2016

Andrew Powell, José Juan Ruiz Gómez, 05 April 2017

Latin America and the Caribbean needs higher growth without increasing debt. This column, based on the new 2017 IDB macroeconomic report, argues that completing intra-regional trade integration is a low-hanging fruit. Trade deals abound, the region has advanced, but regional trade is low – current agreements are too complex and inconsistent. A bottom-up, concrete, politically viable action plan is outlined. Deeper integration would boost growth in any scenario, but the pay-off is even larger if the world becomes more protectionist.

Eduardo Cavallo, Tomás Serebrisky, 29 July 2016

The Latin American and Caribbean region is trapped in a vicious cycle of low savings and poor use of these savings. This column describes how this problem is reinforced by the current financial system, and prescribes three remedies to policymakers and households to break the cycle. The government should create a better environment for saving and develop a better financial system, but it should also tackle investment distortions and fix broken pension systems. Meanwhile, a change in saving culture should be encouraged from the ground up, with financial education offered to citizens early on in their lives.

Alessandro Maffioli, Carlo Pietrobelli, Rodolfo Stucchi, 14 June 2016

Cluster development programmes (CDPs) aim to support industrial clusters of agglomerated firms to achieve higher productivity and sustainable development. Such programmes have been prominent in Latin America over the past decade, but there have been few impact evaluations. This column presents the findings from an evaluation of Latin American CDPs. Various case studies show positive medium-term effects of the programmes on employment, exports, and wages. CDPs are also found to have positive spillover effects on untreated firms, and to improve the network connectivity and technology-transfer ties between firms.

Carlos Vegh, Guillermo Vuletin, 24 February 2016

By the end of 2013, growth in Latin America had begun to decelerate. The ensuing policy responses to this have differed across countries. This column uses data from the past 40 years to analyse policy responses to economic distress in the region. On average, countercyclical policy responses to crises have been more common over the last 15 years than previously. Latin America thus appears to have graduated in terms of monetary and fiscal responses to crises. But there is still a great deal of heterogeneity across countries in the region, and they must continue to build sound and credible fiscal and monetary institutions.

Joshua Aizenman, Yothin Jinjarak, Jungsuk Kim, Donghyun Park, 08 January 2016

Taxation in developing nations has always been difficult, but the Global Crisis has brought further complications. This column examines and compares the tax revenue trends in Asia and Latin America to shed light on some of these issues. Despite their similarities, there is no one-size-fits-all explanation for tax/GDP ratios between the two regions. While progress has been made, the gap between the advanced economies and developing countries offers ample room for improvement. This is particularly important for developing nations as they face growing demand for fiscal spending.

Joshua Aizenman, Yothin Jinjarak, Donghyun Park, 14 February 2015

The Global Crisis put to the fore the possibility that the relationship between financial development and output growth may be non-linear. This column presents new evidence on the issue using data on output growth of ten sectors from Latin America and East Asia. The authors find large differences between the two regions in terms of the impact of financial depth on sectoral growth, and validate the negative impact of financial deepening on output growth in several sectors. The results confirm that the impact of financial development on sectoral growth may indeed be non-linear – i.e. it may promote growth only up to a point. 

Sebastian Edwards, 04 February 2015

The conventional ‘trilemma’ view is that countries that allow free capital flows can still pursue independent monetary policies as long as they allow flexible exchange rates. This column examines the pass-through of Federal Reserve interest rates to policy rates in Chile, Colombia, and Mexico. The author concludes that, to the extent that central banks take into account other central banks’ policies, there will be ‘policy contagion’ and that, even under flexible rates, monetary policy will not be fully independent.

Juan Blyde, 09 November 2014

While participation in global value chains is giving developing countries the opportunity to diversify production and to acquire know-how from global buyers, few countries in Latin America are taking advantage of these new forms of production. Using a combination of innovative datasets at the macro and micro levels this column presents a comprehensive picture of the participation of Latin America and the Caribbean in global value chains and describes why it is so low.

Eduardo Levy Yeyati, Samuel Pienknagura, 10 June 2014

Latin America’s inequality has fallen, driven by a reduction in the educational wage premium. This column discusses potential driving forces behind this phenomenon and argues that while this is a positive outcome, it may reflect a deeper malaise. A preliminary evaluation suggests that supply changes are more important than de-industrialisation. But lacklustre PISA scores support a more dismal hypothesis. The premium decrease may mirror a decline in education quality.

Julián Caballero, Ugo Panizza, Andrew Powell, 02 April 2014

In recent years credit growth in Latin America has been very strong, and countries have become more reliant on foreign bond issuances. This column argues that these phenomena are linked, and may have led to vulnerabilities which domestic and international supervisors are not well-equipped to assess. There is no systematic information on firms’ currency mismatches and hedging activities, and none that includes those of subsidiaries that may be located in other jurisdictions, preventing an accurate analysis of the true risks.

Augusto de la Torre, Eduardo Levy Yeyati, Samuel Pienknagura, 12 January 2014

There is a wave of fashionable pessimism over the future growth of Latin America. This column distinguishes between two main types of concerns – related to the trend of the long-term growth, and to the cyclical vulnerabilities of the region. While the first type is partially justified, the second type is not because such concerns overlook two fundamental changes in Latin American economies. First, the de-dollarisation of financial contracts reduces the adverse effects of currency depreciations. Second, a more credible monetary policy was implemented with a substantial decline in the exchange rate pass-through to inflation.

Ignacio Munyo, Ernesto Talvi, 07 November 2013

In recent years, the growth rates of Latin American countries have been cooling-off in comparison to the period of 2004-08. This column argues that the cooling-off is not due to a change in external factors because these have remained favourable. Persistent economic growth can be achieved by internal transformations. It cannot be sustained solely by the external conditions.

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