Dealing with an international credit crunch is no easy task, as any policymaker in the world would tell you today! Credit flows are the blood of the world’s economic system. When a human artery becomes clogged and the blood flow is interrupted, the consequences can be dire unless the flow is restored promptly. Similarly, a […]
The current financial crisis in the United States raises a fundamental question: are these crises good or bad for long term growth? Some economists believe that crises have negative consequences for long run growth because of increased volatility and wealth destruction. Others believe that crises are opportunities to learn, reform and improve economic and political institutions. This view tends to see crises as a natural and potentially desirable phenomenon in the process of development, which allows important reforms to take place.
The role of Credit Rating Agencies has come to the forefront of the policy debate in recent months. The sudden collapse of complex structured financial instruments that were once categorized as safe “investment grade” products has cast doubts on the way rating agencies do their business, the structure of incentives they face, and the appropriateness of the existing regulatory framework and surveillance mechanisms.
In a previous blog one of us made the point that the increase in the share of public investment in total investment that happened in some countries in recent years could be growth deterring. The concern was (and is) the potential crowding-out effects of public investment on private investment and its negative […]
If Latin American and Caribbean governments had $10 billion to solve their most urgent problems, how should they spend it? Last week, the Inter-American Development Bank (IDB), in a joint venture with the Copenhagen Consensus Center (CCC) and the INCAE business school, organized the Consulta de San José, in the capital city of Costa Rica. […]
In the past week, the volatility in financial markets was not the only storm to hit the region: Hurricane Dean, a category 5 wind-storm (the strongest in the scale) wiped through the Caribbean region leaving a trail of human and economic losses across Haití, Dominica, Santa Lucía, República Dominicana, Jamaica and Mexico’s Yucatan peninsula. And […]
In my previous posting I argued that it is important to focus the attention back on private investment in Latin America. It is well known that a necessary condition for private investment to become an engine of growth is that property rights are well protected, and that the business environment is good enough to attract […]
Fellow blogger Alex Uriarte has called our attention on the issue of the quality of investment. The focus of his posting is, understandably, on public investment as this is the variety that is currently fashionable in Latin America. Governments throughout the region have, in recent years, taken a more interventionist stance and have sought to […]