Aggregate Implications of Heterogeneous Inflation Expectations: The Role of Individual Experience

We explore the implications of heterogeneous, history-dependent inflation expectations in a general equilibrium setting. We propose an experience-based expectations-augmented Kalman filter to represent consumers\u27 heterogeneous inflation expectations, where heterogeneity arises from an anchoring-to-the-past mechanism. Using survey data, we show that the model replicates US consumers\u27 inflation expectations and their heterogeneity across cohorts. We introduce this mechanism into a New Keynesian model and find that heterogeneous expectations anchor aggregate responses to the agents\u27 inflation history, producing sluggish expectations dynamics. Central banks should be active to prevent inflationary episodes that agents will remember far into the future

Cognitive Behavioural Therapy for Gender-based Violence Prevention: Evidence from a Randomized Trial in Mexico

Cognitive behavioral therapy (CBT) has become a powerful and effective tool to deal with violence in many at-risk areas in the world. However, its use for gender-based violence (GBV) and dating violence, although promising, has been limited and used as a response service for survivors, rather than for prevention. To understand to what extent such interventions can help provide tools and skills to young people in their impressionable years to produce behavioral changes that prevent GBV, we carried out such an intervention among high school students in the municipality of Ecatepec in Mexico. We assessed the intervention with a randomized control trial. We introduce the novelty of collecting objective measures from automated neuropsychological tests to explore whether CBT might be functioning through the development of subjects\u27 executive functions. Results from this intervention fail to show any clear change in self-reported violence. They do show, however, impacts on executive functions related to violence, such as emotional recognition and inhibitory control skills

Tax Revolts and Sovereign Defaults

Political crises often coincide with fiscal crises, with complex causal dynamics at play. We examine the interaction between tax revolts and sovereign risk using a quantitative structural model calibrated to Argentina. In the model, the government can be controlled by political parties with different preferences for redistribution. Households may opt to revolt in response to the fiscal decisions of the ruler. While revolts entail economic costs, they also increase the likelihood of political turnover. Our model mirrors the data by generating political crises concurrent with fiscal turmoil. Specifically, we find that our model aligns closely with the conditions observed during the Macri administration (2015-2019). We find that left-leaning parties are more prone to default upon entering office, while right-leaning parties issue more debt. Our framework explains the high deficits observed during the Macri administration as well as the sovereign default that occurred immediately after the left regained power

Research Insights: What Are the Downstream Consequences of Non-Tariff Barriers in Argentina?

Non-Automatic Import Licenses (NAILs) significantly reduce firm imports, leading firms reliant on these imported inputs to decrease exports and employment. In markets where a firm is relatively large, it can respond to NAILs by adjusting its markups while maintaining relatively stable prices and output. The impact of NAILs depends on the sector characteristics and the exports destinations

Disruption in the Classroom: Experimental evidence from Ecuador

We study how poorly-behaved children affect learning and other outcomes of their peers using data from a unique experiment in Ecuador. Within each school, students were randomly assigned to classrooms in every grade for seven consecutive grades, between kindergarten and 6th grade. Children with persistent behavioral problems lower the math and language achievement of their classmates. The more poorly-behaved children there are in a class, the larger is the negative effect on the achievement of their classmates. These negative impacts are larger for younger children, and they persist for at least two years after exposure to a poorly-behaved peer. We find indirect evidence that children with persistent behavioral difficulties are passed around schools

Willingness to Pay for Climate Mitigation: Evidence from Latin America

The ability of countries in Latin America to achieve net zero greenhouse gas (GHG) emissions by mid-century, the target set by the Paris Agreement, will depend critically on citizen support. To gauge this support, we administered a contingent valuation survey to representative samples in seven of the regions leading GHG emitting countries and in the United States, which is used as a comparator. The survey elicits respondents willingness to pay (WTP) for achieving net zero by 2050 and uses a split sample design to test whether WTP is affected by the distribution of decarbonization costs across households. Our estimates of mean WTP in the Latin American study countries are on par both with our estimate for the United States, and with estimates from a recent CV study for China, Sweden, and the United States. However, among the Latin American study countries, mean WTPs for Argentina and Brazil are relatively low. We also find that the distribution of the costs of decarbonization across households does not have a clear effect on WTP and that the drivers of WTP for our Latin American study countries are similar to those the literature has identified in other regions

Independent Consultation and Investigation Mechanism: 2024 Annual Report

In 2024, MICI managed 31 complaints from 11 countries in Latin America and the Caribbean related to projects financed by the IDB, IDB Invest and IDB Lab. MICI-facilitated dispute resolution led to agreements between the parties and the completion of the dialogue process in three complaints, while the Compliance Verification Phase handled a record number of parallel simultaneously. This Annual Report reflects our continued commitment to transparency, accountability and improving our processes to help enhance the development projects financed by the IDB Group

Tech Report: Technology for Accesibility

In an increasingly digital context, technology has become a cornerstone of daily life, offering opportunities for the full inclusion of individuals in areas such as education, work, health and civic integration. Despite significant progress in recent years, important challenges remain. This report will analyze the definition of digital inclusion, the current landscape in Latin America and the Caribbean (LAC), regional initiatives and best practices for implementation. It will also look at different applications and technological tools designed to improve the quality of life of people with disabilities. Finally, a reflection on future trends and perspectives will be discussed, taking into account emerging technological advances and socio-cultural changes in the region

Health impact assessment

This guide describes how to conduct a Health Impact Assessment (HIA), its process for identifying environmental and social risks and impacts, as well as the optimal way to systematically identify, assess, and manage community health impacts related to IDB-financed infrastructure projects

Innovative Financial Tools for Neighborhood Upgrading

In Latin America and the Caribbean, over 120 million people live in informal neighborhoods. The investment needed to address the housing deficit is around USD 1.4 trillion. This represents about 20% of the entire region\u27s GDP, significantly exceeding the capacity for public investment. This is, public budgets, even with multilateral support, will always fall short of addressing the scale of demand. Therefore, this Discovery Paper looks at innovative financial instruments and solutions, such as thematic bonds, use of catalytic capital, blended finance mechanisms, and outcomes-based payment schemes, that can scale-up housing and urban development solutions and improve program performance by increasing private capital engagement. We present 14 cases that have overcome some of the typical barriers to private sector involvement in the sector and show potential for replication. Then, we outline a series of key messages and recommendations for public sector representatives, multilateral and cooperation agencies, private investors, developers, entrepreneurs, professionals, and other experts committed to innovating at scale in response to one of the most pressing challenges of our time