How Vulnerable is Central America to Shocks From the South? Inter-American Development Bank 10-25-02.

Slides:

Advertisements

Similar presentations

Some (unexplored) effects of China on Latin America Eduardo Lora China and India: Whats in it for Africa OECD Development Center Paris, March 17, 2006.

Advertisements

Mobilizing international resources for development: Foreign direct investment and other private flows Mansoor Dailami New York February 15th, 2008 Manager,

The Bretton-Woods Conference June Founders Harry Dexter White - Chief International Economist at the U.S. Treasury Harry Dexter White - Chief International.

MINISTRY OF PLANNING Brazil and Latin America Economic Outlook Minister Paulo Bernardo Washington, May 13th, 2009.

Lessons from Systemic Financial Crises Guillermo Calvo Columbia University India Policy Forum Sponsored by NCAER and The Brookings Institution. New.

Regulatory and Supervisory Reform: Going back to Basics: The Latin American Perspective MÓNICA APARICIO SMITH Madrid, June 15, 2009.

The global crisis and trade in the Middle East and North Africa region Farrukh Iqbal The World Bank May 5, 2009.

LATIN AMERICA’S LESSONS FROM CAPITAL ACCOUNT LIBERALIZATION José Antonio Ocampo and Bilge Erten Committee on Global Thought Columbia University "Capital.

The Political Economy of Integration Agreements and the Crisis: Coping Strategies for Small States Carol Wise University of Southern California.

The Russian Default of 1998 A case study of a currency crisis Francisco J. Campos, UMKC 10 November 2004.

Otaviano Canuto BRAZIL – Ministry of Finance BRAZIL DAY 2003 New York, November 17, 2003 From the Confidence Crisis Towards Sustainable Growth.

INTERNATIONAL FINANCIAL MANAGEMENT Lecture 3 Topic: Balance of Payments.

1 Henrique de Campos Meirelles Febraban – Lima, March 2004 Brazil: Recent Economic Developments.

Latin American Crisis of the 1980s “The Lost Decade” Econ. 462 Nov. 24, 2009 Edward Kulow John Magallanes Yojasi Lomas.

The National Income Accounts

Capital Flows and Recent Financial Crises Lecture # 16 Week 11.

Latin American Countries Map Review. Mexico Nicaragua Panama Colombia Haiti Puerto Rico Jamaica Honduras The Bahamas Cuba United States Belize Guatemala.

FERNANDO FERRARI FILHO (UFRGS, CNPQ) LUIZ FERNANDO DE PAULA (UERJ, CNPQ) Conference “Emerging Economies During and After the Great Recession” Cambridge,

El mundo español Jack Miley

External Sector Econ 102 _2015. External Sector How is a country linked with other countries in the global world? 1)There are exchange of Goods and Services.

Mr. Sloan Riverside Brookfield High school.  2 Hours and 10 Minutes Long  Section 1-Multiple Choice ◦ 70 Minutes Long ◦ Worth 2/3 of the Score  Section.

GOOD JOBS WANTED : Labor Markets in América Latina GOOD JOBS WANTED : Labor Markets in América Latina Inter-American Development Bank Inter-American Development.

The East Asian Crisis: Causes and Effects Joseph E. Stiglitz Senior Vice President and Chief Economist, World Bank.

November 7 th, 2010 Prepared for Presentation at the XLIV FELABAN Annual Assembly Punta del Este, Uruguay Ernesto Talvi Director Académico de CERES Non-Resident.

Remittances, Real Effective Exchange, and Monetary Policy Alexei Kireyev, IMF Денежные переводы, реальный эффективный валютный курс и денежно-кредитная.

Economic Growth in Latin America: Past, Present and Future Perspectives. Andrés Solimano ECLAC, United Nations November 11, 2004.

Capital Flows and the Current Account By Sebastian Edwards UCLA and NBER December, 2002.

Dollarization and Crises: Ways In and Out Alejandro Izquierdo De-dollarization Strategies and Domestic Currency Debt Markets in Emerging Economies Okinawa,

Central America Macro Watch April 20, Agenda External Financial Conditions Economic Growth and Outlook The Real Exchange Rate and Inflation Effects.

External Sector Econ 102 _2013. External Sector How is a country linked with other countries in the global world? 1)There are exchange of Goods and Services.

1 Simple View of Exchange Rate Determination. 2 EUR exchange rate against the dollar: EUR value in USD.

The elusive quest for macro stability: the role of debt denomination Ricardo Hausmann Kennedy School of Government Harvard University March 10, 2002 Fortaleza,

Macroeconomic Challenges for Latin America: Where do we Stand? Prepared for Presentation at the XXX Meeting of the Latin American Network of Central Banks.

1 The Financial Crisis and its Impact on Latin America LASA Workshop on the Crisis and its Impact on Latin America October 6, 2010 Nora Lustig Samuel Z.

1 ROUNDTABLE POLICYMAKER DISCUSSION: The Financial Angle Guillermo A. Calvo IADB, University of Maryland and NBER October 24, 2003.

1 The Financial Crisis and its Impact on Latin America A LAGO Workshop Series Tulane University September 16, 2010 Nora Lustig Samuel Z. Stone Professor.

Perú: Recent Economic Developments and Perspectives Central Reserve Bank of Peru October 2002.

LATIN AMERICA’S LESSONS FROM CAPITAL ACCOUNT LIBERALIZATION José Antonio Ocampo Columbia University.

Addressing the Downturn in LAC: Policy Analysis Guillermo Calvo Columbia University XXIX Meeting of the Latin American Network of Central Banks and Finance.

Latin American Sovereigns Theresa Paiz Fredel, Director April 2005.

Exports Domestically produced goods and services sold in markets in other countries Imports Foreign-made products and services purchased by domestic consumers.

Angola: Perspectives on the Financial Crisis

Brazil’s Currency Crisis. 2 Brazil: Recent Problems (2002) 40% devaluation of the Real against the dollar Large public debt (~60% of GDP), default risk.

March 28, 2004 LAC-7 Macroeconomic Outlook. I.Post-Adjustment Latin America: Back in Vogue with International Investors II.LAC-7 Macroeconomic Outlook:

Los países hispanohablantes The Spanish-speaking countries.

XXIV Meeting of the Latin American Network of Central Banks and Finance Ministries The Effect of Oil Prices The Case of the Importers Fidel Jaramillo Inter-American.

PADI Division of Production, Productivity and Management Unit of Industrial and Technological Development Program for the Analysis of Industrial Dinamics.

Latin America Outlook with special reference to Argentina and Chile Guillermo A. Calvo Research Department Inter-American Development Bank Washington,

Growth and Structural Reforms: Stylized Facts and Findings Eduardo Lora Euro-Latin Research Network Meeting Madrid, October 2002 Research Department Inter-American.

1 Reforming Latin American Economies Ricardo Ffrench-Davis University of Chile COMMISSION ON GROWTH AND DEVELOPMENT SEMINAR April 12, 2007.

XXV MEETING OF THE LATIN AMERICAN NETWORK OF CENTRAL BANKS AND FINANCE MINISTRIES Adrián Armas U.S. Monetary Policy and its Implications for Latin American.

Global Development Finance 1999 Main Messages Global Economic Environment Main Messages n n Global output slowdown deeper than anticipated   Developing.

ON THE EMPIRICS OF SUDDEN STOPS Guillermo Calvo, Alejandro Izquierdo and Luis-Fernando Mejía and Luis-Fernando Mejía April 10, 2003.

1 April 2001 Banco Central do Brasil The Case of Brazil The Case of Brazil The Managed Floaters: Float or Sink? Float! Float! Ilan Goldfajn.

Growing economic relations between Latin America and Asia: What is in it for Taiwan? Alicia García-Herrero BBVA Research│Chief Economist for Emerging Markets.

1 Afonso Bevilaqua December 2003 Reducing Public Sector’s FX Exposure: The Brazilian Experience.

1 Afonso Sant´Anna Bevilaqua November 2003 Brazil: Recent Economic Developments.

WHY INVEST IN PERU? MACROECONOMİC SOUNDNESS. Fast and steady growth of the Peruvian economy in the last decade Real GDP, * (%Variation) Source:

1 How to Sustain Stability July 2002 Banco Central do Brasil Ilan Goldfajn.

External Sector Econ External Sector How is a country linked with other countries in the global world? 1)There are exchange of Goods and Services.

1 Henrique de Campos Meirelles Davos, January 2004 Gearing Brazil for Growth.

1 Currency and Maturity Matchmaking: Redeeming Debt from Original Sin Banco Central do Brasil National Policies Panel November 2002 Ilan Goldfajn.

1 Eduardo Loyo Cancún January 2005 The Brazilian Economy: and Beyond.

FINANCIAL CRISES Lessons and Prospects

Mexico, NAFTA, and Expansion Toward the European Union

Balance of Payments.

Latin American Countries Map Review

Latin America in 2006: Beyond the Political Cycle

Latin American Economy

NS4540 Winter Term 2016 Latin America: Recovery 2016

Presentation transcript:

How Vulnerable is Central America to Shocks From the South? Inter-American Development Bank

Outline Central America and previous capital markets crises How has the region responded to the current crisis? How vulnerable is the region to capital markets disturbances?

Outline Central America and previous capital markets crises How has the region responded to the current crisis? How vulnerable is the region to capital markets disturbances?

CAC7 - Bilateral Real Exchange Rate with US (Dec. 1995=100) Source: WEO (Sept 2002) - forecast for 2003 from EIU Sep Mexican Crisis Asian CrisisRussian CrisisArgentina Crisis

Real Exchange Rate Depreciation (vis-à-vis the US dollar, Jun vs. Jan. 1997) Source: IFS/IMF

CAC6- Lending Interest Rates Source: IFS (IMF). * The values do not include El Salvador CAC7 Average LAC7 Average CAC7 Median LAC7 Median

CAC-7 Capital Flows (billions of US dollars) Source: WEO (Sept 2002) Includes Errors and Omissions FDI Non FDI Errors & Omissions Total Capital Flows+ Errors & Omissions

CAC-7 Capital Flows (% of Total Capital Flows+Errors & Omissions, Average f) Source: EIU (Sept 2002) FDINon FDIErrors & Omissions

CAC7 Current Account Balance (% of GDP) Source: WEO (Sept 2002) - forecast for 2003 from EIU Sep- 2002

CAC7- Current Account Balance (as a % of GDP, 2001) Source: EIU SLV DOM CRI PAN HON GTM NIC

f LAC7 CAC7 Private Capital Flows (US$ billions) Source: WEO(Dec 2001). LAC 7 = Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. CAC 7 = Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua Panama.

Outline Central America and previous capital markets crises How has the region responded to the current crisis? How vulnerable is the region to capital markets disturbances?

Spreads w.r.t. US Treasury Bonds Source: Bloomberg

Gross Domestic Product (yoy % change) Source: EIU (Oct 2002) -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% f2003f CAC 7LAC 7

Gross Domestic Product (yoy % change) Source: EIU (Oct 2002) -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% f2003f CAC 7USA

Econometric Evidence: CAC7 and U.S.A. GDP Growth Dependent variable: Cyclical component of CAC7 GDP growth (1) (2) Cyclical component of U.S.A. GDP growth (2.19) (2.12) Terms of trade (0.68) (1.68) International interest rate (-0.81) (-1.64) LEI spread (0.50) Observations Number of countries 7 7 Fixed effects YES YES (1)Data from 1980 to 2001 (2) Data from 1992 to 2001

Exports + Imports (% GDP) (2001) Source: WEO (Sept 2002) and RES/BID estimates

CAC7 - Export Composition according to destiny (2001) Source:EIU USMexicoCAC7

CAC-7 Remittances (billions of US dollars) Capital Flows + Errors y Omissions Remittances

CAC-7 Remittances (as a % of FDI Capital Flows, for 2001) Source: WEO, Central Banks and RES estimates

Total Capital Flows and Remittances (% of GDP) Average Source: WEO (Sept 2002), Central Banks and RES estimates Capital flows include errors and omissions

Outline Central America and previous capital markets crises How has the region responded to the current crisis? How vulnerable is the region to capital markets disturbances?

CAC-7 Capital Flows* (as a % of GDP, 5 year average as of 2001) Source: WEO & EIU * Includes Errors & Omissions

Public Sector Balance (% of GDP) Source: EIU (Sept 2002) CRI DOM SLV HON NIC GTM PAN

Fiscal Sustainability Source: Own estimates. Data from EIU Notes:/* Refers to geometric average of growth rates during the last decade Observed Public Debt (% of GDP) Real Interest Rate Real GDP Growth * Observed Primary Surplus (% of GDP) Req. Primary Surplus (% of GDP) CRI DOM SAL GTM HON NIC PAN

What makes countries vulnerable to costly adjustments? Low supply side openness High indebtedness High financial mismatches –Public Sector –Private Sector High financial exposure to the public sector

Supply-Side Openness Coefficient (Supply of Tradables - Interest Payments / Absorption of Tradables)) Source: WEO (Sept 2002) and RES/BID estimates

Source: EIU.(Median) CAC7:Public Debt (% of GDP) Total Public DebtExternal Public Debt

Source: EIU and Central Banks.(Median) CAC7 & LAC7:Public Debt (% of GDP) f CAC7 Total Public DebtCAC7 Ext. Public Debt LAC7 Total Public DebtLAC7 Ext. Public Debt

Currency Composition of Public Sector Debt (2001) [eD*/(D + eD*)] Source: Central Banks and EIU

Financial Mismatch of the Public Sector [ (D/eD*)/(Y/eY*)] (2001) Source: Central Banks and EIU

Guatemala Dominican Rep. Honduras Costa Rica Nicaragua Deposits in FC/Deposits Loans in FC/Loans Deposits and Loans in Foreign Currency

Honduras Guatemala Costa Rica Nicaragua Loans in FC to non-tradable sector/Loans

Honduras Guatemala El Salvador Costa Rica Nicaragua Investment in Public Sector/Assets (loans to public sector are not considered)

Capital Flows Vulnerability: A summary = High Financial Mismatch of the Public Sector Public Debt (% of GDP) Financial System exposure to the Public Sector = Medium= Low DOMGTMCRISLVHONNIC PAN ? Financial Mismatch of the Private Sector Source: Central Banks and EIU ??

Concluding Remarks Central America has not been hurt by previous capital markets crisis The current crisis in South America is not an exception Despite the fact that remittances from the US help cushion crises, there are several issues of concern in some countries. The major source of concern should be the behavior of the US economy.

How Vulnerable is Central America to Shocks From the South? Inter-American Development Bank