The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Capital controls: IDB calls for action against rising currencies

Monetary policy seen as insufficient; Macro-prudential policies also required

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 last month.

"External funding at low cost under the present circumstances, and despite our tight prudential rules, creates incentives to increase risk taking and can end up in asset price distortions vis-à-vis the exchange rate"

Luiz Pereira da Silva, Central Bank of Brazil

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". Izquierdo says that monetary policy alone will be ineffective in combating currency appreciation in countries that the report designates as the faster-growing "Brazil cluster" because raising interest rates would increase capital inflows from abroad, thereby putting pressure on the exchange rate.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree