MISALIGNMENT, LIABILITIES DOLLARIZATION AND EXCHANGE RATE ADJUSTMENT IN LATIN AMERICA

Exchange rates in Latin America display a large volatility, constitute a central element of the policy strategies and their evolution have an important impact on financial stability due to the dollarization of liabilities which most countries exhibit. However, assessments on equilibrium exchange rates are scarce in the region. This paper aims at both filling this gap and analysing the impact of the adjustment of the exchange rates to equilibrium on financial stability. Building on the methodology of Alberola et al (1999,2002), we show that the stock of net foreign assets and the evolution of productivity are the fundamentals underlying the behavior of the real exchange rate. Using an unobserved components methodology in a cointegration framework, a time-varying equilibrium real exchange rate is derived, and deviations from this equilibrium provide an estimate of the degree of multilateral misalignment. The results uncover among other things the large overvaluation of the Argentinean peso in 2001, which was only partially explained by the estimated dollar overvaluation. The adjustment of exchange rates in 2002 corrected this and, to a lesser extent, other misalignments. The final part of the paper addresses the impact of liability dollarization on the adjustment of exchange rates. It is argued that the real exchange rate will tend to overshoot its equilibrium level, due to the need to foster higher current account surplus in the aftermath of depreciation to make up for to the increase in liabilities. An adjustment to account for this effect is performed on the previous results. This overshooting, when coupled with sudden stops of capitals, may help explaining the higher volatility of real exchange rates in the region.Equilibrium Exchange Rates, Liabilities dollarization, Overshooting

Lula, Argentina y el futuro de las reformas en América Latina

Este análisis pretende, a partir de la comparación entre Brasil y Argentina, justificar las razones de sus trayectorias divergentes con el fin de evaluar el futuro de las reformas en América Latina y sus posibles alternativas. La respuesta de Brasil y Argentina a sus recientes crisis ha sido diametralmente opuesta. Mientras que en Argentina se ha producido una involución de las reformas que retrotrae a modelos de desarrollo superados, Brasil ha apostado por la disciplina económica y el impulso de las reformas, a pesar de la impopularidad de esta estrategia, con el fin de recuperar la confianza de los mercados internacionales. Tras el pobre desempeño económico de los últimos años, el modelo argentino de aislamiento de los mercados internacionales puede resultar atractivo, pero América Latina depende del capital exterior para financiar su crecimiento. Por ello, del éxito de Brasil en su estrategia dependen en buena medida que éste y otros países no sigan la deriva argentina, y, en definitiva, las posibilidades de lograr un crecimiento sostenido en la región

Globalidad, inseguridad, volatilidad

Este artículo intenta analizar los impactos económicos de los atentados terroristas del 11-M en Madrid desde el enfoque de la globalización. Las consecuencias económicas de los atentados terroristas del 11 de marzo en Madrid transcienden el ámbito domestico y se materializan, principalmente, en un incremento de la incertidumbre, que afecta a los mercados, sobre todo financieros, a través de un deterioro de las expectativas de los agentes y una mayor percepción del riesgo. La certidumbre de una matriz islamista de los atentados, que se ha ido asentando paulatinamente, es la que explica que los ataques hayan generado, también en el ámbito económico, alarma internacional y la que hace que el previsible impacto sea mayor y más duradero que si se tratase de terrorismo etarra, aunque sin llegar, ni mucho menos, a ser un nuevo 11-S, tanto por la diferente escala y localización del ataque como por la diferente posición cíclica en la que se encuentra la economía global

A New Transatlantic Channel Between Latin America and Spain: Remittances and Their Role in Economic and Financial Development

The purpose of this article is to offer an overview of the remittance phenomenon, mainly from a Latin American and Spanish perspective and with a primarily economic focus

Tango with the Gringo: the hard peg and real misalignment in Argentina

Between 1990 and 2001 the Argentine peso appreciated by 80 percent in real terms, and its overvaluation has been singled out as one of the main suspects in the debate on the causes of the Argentina collapse of late 2001. This paper assesses the degree of real misalignment in Argentina over the Convertibility period using a model in which the equilibrium real exchange rate is defined as the value consistent with (i) a balance of payments position where any current account imbalance is financed by a sustainable flow of international capital (external equilibrium), and (ii) traded/nontraded sector productivity differentials (internal equilibrium). Empirical implementation of the model suggests that the initial real appreciation of the peso, between 1990 and 1993, was consistent with the productivity increases that Argentina enjoyed following the stabilization of the economy after the hyperinflation of the late 1980s. But after 1996 a widening gap opened between the observed real exchange rate and that consistent with a sustainable net foreign asset position. Our estimates indicate that in 2001 the peso was overvalued by over 50 percent. The model allows us to assess how much of the overvaluation resulted from Argentina's inadequate choice of anchor currency and how much from a divergence of fundamentals between the U.S. and Argentina, ultimately due to the maintenance of policies inconsistent with the peg. We find that both factors played a role in the overvaluation accumulated between 1977 and 2001 that preceded the collapse of the Convertibility regime.Fiscal&Monetary Policy,ICT Policy and Strategies,Environmental Economics&Policies,Payment Systems&Infrastructure,Economic Theory&Research,Economic Stabilization,Macroeconomic Management,Economic Theory&Research,Environmental Economics&Policies,Fiscal&Monetary Policy

LA EUROPEIZACION DE LA POLITICA MACROECONOMICA

El objetivo de la política económica en la última década ha sido la inserción de la economía española en el sistema económico europeo, caracterizado, en lo económico, por la apertura comercial y la competencia y, en lo social, por la existencia de un desarrollado Estado del Bienestar. Este capítulo se centra en el análisis de la política macroeconómica, que podemos definir como aquélla dirigida a mantener la economía en una senda estable de crecimiento. Puesto que los contenidos de otros capítulos del trabajo se solapan con esta definición, aquí nos ceñiremos a una concepción estrecha de la política monetaria, centrándonos en la política fiscal y la política monetaria.Spain, European Union, economic integration

SAY YOU FIX, ENJOY AND RELAX THE DELETERIOUS EFFECT OF PEG ANNOUNCEMENTS ON FISCAL DISCIPLINE

This paper explores the impact of actual exchange rate regimes on fiscal discipline, which we purportedly link to the effect of announcing the peg and to the availability of external funds. To stress this point, the focus of the analysis is emerging markets spanning from the beginning of the nineties, given the importance of financial integration in the last fifteen years and the centrality of external financing for these countries. We empirically show that announcing the pegs has deleterious effects on fiscal discipline, while ‘de facto’ pegs which have not been announced deliver superior fiscal outcomes. The evidence suggests that this is due to the initial positive credibility shock of the announcement, which allows for easier and less costly access to the financing of fiscal deficits in emerging countries.exchange rate regimes, fiscal discipline

Is there scope for inflation differentials in EMU?

Artículo de revist

The economic and financial crisis, policy responses and their impact on public finances : a global perspective

Artículo de revist

Interpreting inflation differentials in the euro area

Artículo de revist