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.

Authors: Carlos Giraldo, Latin American Reserve Fund, Bogotá, Colombia. Email: – cgiraldo@flar.netIader…

Direct Investment (DI) in Paraguay has been influenced by various economic and structural factors over the past decades. From the economic boom of the 1970s, driven by major infrastructure projects and active investment incentives, to the liberalizing reforms of the 1990s and sectoral diversification in the twenty-first century, the development of DI has been shaped by a mix of internal and external factors.

In the early months of the year, most economies in the region have shown resilience despite a highly uncertain international environment, characterized by falling commodity prices and rising geopolitical and trade risks. Several economies have experienced a slowdown in real GDP growth and a continuation of the disinflation process, with significant differences across countries.

Latin America and the Caribbean (LAC) face a complex global landscape characterized by geopolitical shifts, trade fragmentation, and heightened uncertainty. Within this environment, the growing trend of nearshoring—the relocation of production activities closer to consumer markets—emerges as a potential source of economic dynamism.

This blog post shares the story behind our recent working paper on how Colombia’s unique Gross Leverage Position in foreign exchange derivatives helped prevent a housing bubble from bursting and what emerging economies can learn from it.