The characteristics of recent capital inflows into Latin America are discussed. It is argued that these inflows are partly explained by conditions outside the region, like recession in the United States and lower international interest rates. This suggests the possibility that a reversal of...

The shift to inflation targeting has contributed to the relatively low inflation observed in some emerging market economies although, as noted by many economists, the preconditions required for a successful implementation were not in place. The existence of managed exchange rate regimes, a...

During the past two years Latin America has received sizable international capital inflows. This paper compares the recent experience with that of the late 1970s. The analysis examines differences and similarities between the two episodes in three broad areas: domestic macroeconomic conditions...

In countries such as the Soviet Union, where wealth is mainly stored in monetary assets, the behavior of the money to income ratio is a poor indicator of the growth of undesired monetary balances (monetary overhang). In those countries a monetary overhang is primarily a wealth overhang, which...

In a model where all banks are initially solvent, an exogenous shock affects confidence, causing a flight from deposits into domestic and foreign currency. Real interest rates increase unexpectedly, affecting firms and raising the share of the banks’ nonperforming assets. This increase causes...

Whereas some central bank derivatives and other contingent liabilities arise from anomalous circumstances, there are a number of positive reasons that explain their popularity. After analyzing the rationale for these operations, we stress that most of these operations, being off-balance sheet,...

This paper argues that the IMF''s traditional monetary conditionality-a ceiling on net domestic assets of the central bank and a floor on its net international reserves-should be adapted in IMF-supported adjustment programs with countries which have a framework of explicit inflation targets for...

A loss of solvency increases central bank vulnerability, reducing the credibility of commitments to defend a nominal regime, including an exchange rate peg. This paper develops a methodology to assess central bank solvency and exposure to risk. The measure, based on Value-at-Risk, is frequently...