The blog examines the evolution of direct investment in Paraguay between 2008 and 2024, highlighting sectoral differences in investment flows, corporate profitability, and export orientation. Drawing on firm-level data from the Central Bank of Paraguay, this joint study with FLAR provides valuable insights into investment dynamics and informs policies to attract capital and promote productive diversification.

View document Authors:Camilo Contreras, Carlos Giraldo y Cristian Huertas Release date: October…

Geopolitical tensions have become an increasingly important source of economic and financial uncertainty. Events such as the Russia–Ukraine war, tensions between the United States and China, trade disputes, sanctions, and regional conflicts have intensified concerns about the resilience of financial systems, particularly in emerging economies, where banks play a central role in financial intermediation and remain heavily dependent on domestic funding conditions.

When the U.S. Federal Reserve changes interest rates, which banks transmit those shocks more strongly to the rest of the world? Conventional wisdom suggests foreign-owned banks should be more sensitive because they belong to multinational banking groups. Our evidence, based on more than 2,000 banks across 116 countries, suggests a different conclusion: ownership alone is not a reliable predictor of how international monetary shocks affect bank lending.

Housing affordability has traditionally been analyzed through a macro-financial lens. Credit conditions, income growth, interest rates, and speculative dynamics have dominated the debate around housing prices and their divergence from fundamentals. Yet, as climate change accelerates, a new structural driver is becoming increasingly relevant for urban real estate markets: climate risk and climate-related amenities.

Capital acts as a safeguard that enables banks to endure shocks that might otherwise trigger distress episodes. The level of capital a bank maintains shapes its incentives to manage risks responsibly and determines its capacity to absorb losses during adverse economic conditions.

Nuestro reciente documento de trabajo del FLAR, “Government Debt Expansion and Bank Capitalization: The Conditioning Role of Institutional Quality”, explora cómo los ratios de capital de los bancos responden a los shocks de deuda pública sobre y cómo esta respuesta varía con la calidad regulatoria. El capital bancario es un elemento central de la estabilidad financiera y su comportamiento cíclico ha recibido considerable atención en la literatura macroprudencial.

The COVID-19 pandemic marked a turning point in global macroeconomic dynamics, reviving debates around the fiscal origins of inflation. While inflation had remained subdued in many advanced economies for decades, the massive fiscal responses to the pandemic, combined with supply chain disruptions and commodity price shocks, triggered a sharp and persistent rise in prices.

The post-pandemic resurgence of inflation has renewed attention on inflation persistence and the role of central banks in maintaining credibility. While conventional explanations emphasize fiscal discipline, exchange rate regimes, or inflation targeting, these factors do not fully explain why some countries return rapidly to price stability while others experience prolonged inflationary episodes.