Featuring members of The Latin-American Shadow Financial Regulatory Committee (CLAAF):
Liliana Rojas-Suarez, President, CLAAF; Senior Fellow, Center for Global Development
Guillermo Calvo, Professor, Columbia University; Former Chief Economist, Inter-American Development Bank
Pablo Guidotti, Dean and Professor, School of Government, Universidad Torcuato di Tella; Former Vice-Minister of Finance, Argentina
Roque Fernandez, Professor, Universidad del CEMA, Buenos Aires; Former Minister of Finance, Argentina
Pedro Carvalho de Mello, International Coordinator of FGV Management and Professor at ESALQ, Universidade de São Paulo; Former Commissioner of Comissão de Valores Mobiliários
The misadventures of the North seem to go hand-in-hand with a boom in emerging markets, particularly in Latin America. Spain is looking down a cliff and France threatens to get rid of the Teutonic fiscal belt, increasing angst and uncertainty in the North. In contrast, Latin American economies are trying but failing to prevent sizable currency appreciation, and a surge of credit flows. Given this scenario, is Latin America hopelessly, and counterproductively, fighting a bonanza that is here to stay, given that the North is mired in stubborn recession; or is the fight a worthy quest, necessary in order to prevent a painful replay of a boom-bust cycle? In this latter regard, what policies would be most effective under current conditions? Are macroprudential regulations helpful instruments to keep these economies on track? Does Basel III offer a reliable guide for regulators, or is it in need of major overhaul?
Also, should central banks blindly pursue Inflation Targeting, or should Financial Stability (preventing bubbles associated with a capital-inflow episode, for example) also be a central bank objective? How can these two disparate objectives be handled? Should economies in the region coordinate their exchange rate policies, or it is alright to go solo and risk being accused of implementing beggar-thy-neighbor policies?
These are a few of the questions on which the Latin American Shadow Financial Regulatory Committee will focus in its next meeting. Their statement will be shared publicly at this CGD event.