CGD's weekly Global Prosperity Wonkcast, event videos, whiteboard talks, slides, and more.
In this CNN interview, Senior Fellow Liliana Rojas-Suarez argues that the recently announced measures in Cyprus that imposes losses on non-insured depositors as part of a full-fledged bank restruct
Senior fellow Liliana Rojas- Suarez discusses the U.S. credit rating downgrade and its effects. She emphasizes that the fundamental problems behind the 2008 financial crisis – namely the deeply troubled mortgage markets - have not been solved, and that this downgrade, together with the ongoing European crisis, are indicative of an impending long period of very low global growth. Rojas-Suarez predicts that there will be no quick economic recovery for the United States resulting in stagnant growth and unemployment rates.
CGD Senior fellow Liliana Rojas-Suarez discusses what implications might befell Latin American economies if the U.S. does not raise its debt ceiling.
Senior Fellow Liliana Rojas-Suarez made comments on the sovereign debt auctions held recently by several European governments. She thinks the so-called success of these auctions is relative for two reasons. First, it is important to remember that before this auction took place, the European Central Bank intervened to buy sovereign bonds in order to lower spreads in the market, which at the time were sky-high. Second, an important proportion of these bonds have been bought by local investors. It is, therefore, worrisome that the liquidity that the European Central Bank has injected into a number of European banks might be channeled (at least partly) to the purchase of sovereign bonds. The concern is that in the event of sovereign debt defaults, banking crises would also ensue.
Latin America may be quite vulnerable to events in Europe. Beyond the risk that a deep crisis in Europe may result in double dip recession in advanced economies with deleterious global implications, Latin America's trade and financial channels with Europe are large and growing. On the other hand, as in the 1970s, capital flight from advanced economies (especially Europe) could mean more capital flowing into Latin America, offering at least a temporary relief from real sector shocks. The Latin-American Shadow Financial Regulatory Committee (CLAAF) met to address the following issues:
• Under what international scenarios will economic and financial stability in Latin America be compromised?
• Could financial systems in the region withstand a crisis in Spain's banking system?
• Is the recovery in the region sustainable or just the result of temporary capital inflows?
• How should the region's policymakers respond to current vulnerabilities? Is now the time to consider capital controls?
• In light of the recent international experience, should the role of central banks in the region be revised, and should financial regulation be reformed?