by Rob Dwyer
A report by the Inter-American Development Bank suggests that fast-growing Latin American economies will need to implement macro-prudential policies to counter exchange rate appreciation. The use of these tools – which include capital controls, liquidity regulations and capital requirements and provisions – to combat the currency appreciation caused by high levels of capital inflows is contentious and was the topic of much debate at the IDB’s annual meeting in Calgary over the weekend.
Alejandro Izquierdo, co-author of the IDB report, One region, two speeds – challenges of the new global economic order for Latin America and the Caribbean, told Euromoney that avoiding “excessive exchange rate appreciation… will require very good macro-economic management to make sure that you don’t have overheating”.
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