Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Banking credit to the private sector in Latin America has on average increased by 7 percent of GDP from primo 2004 to ultimo 2011, with real credit in some countries growing by up to 20 percent per year. This paper documents and analyzes the patterns of credit growth in 18 countries in Latin America and uses econometric methods to determine whether it is indicative of financial deepening or poses risks of credit booms. The strongest credit growth occurred for consumption and mortgages within the household sector and for construction within the corporate sector. At the same time credit has de-dollarized in most countries and there are some signs of maturity lengthening. To assess whether the recent credit growth is excessive two different methods are applied. First, by application of HP-filters the paper finds that credit-to-GDP levels in a number of countries are above their long-term trend. Second, using a panel co-integration approach on 107 high and mid-income countries the paper estimates a model for the credit-to-GDP levels. Comparing the actual levels of credit with the ones predicted by the model we find that some countries in Latin America show significant and positive deviations. These results indicate the existence of a certain level of risk in the recent credit developments.

Credit --- Credit control --- Credit allocation --- Credit policy --- Monetary policy --- Borrowing --- Finance --- Money --- Loans --- Government policy --- Banks and Banking --- Money and Monetary Policy --- Macroeconomics --- Money Supply --- Money Multipliers --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Personal Income, Wealth, and Their Distributions --- Monetary economics --- Banking --- Bank credit --- Commercial banks --- Credit booms --- Financial institutions --- Personal income --- National accounts --- Banks and banking --- Income --- Costa Rica

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

An asset and liability management framework for managing risks arising from sovereign foreign exchange obligations requires a joint analysis of (i) the external financial liabilities resulting from a country's sovereign debt and (ii) the foreign exchange assets of its central bank. Governments often issue sizable amounts of debt denominated in foreign currencies, subjecting their fiscal positions to foreign exchange volatilities. Prudent management of a sovereign's foreign exchange position under an asset and liability management framework enables governments to mitigate risks at the lowest possible cost, hence increasing resilience to external shocks. Based on the challenges associated with the implementation of an asset and liability management framework, this study recommends a practical approach that includes analysis of the foreign exchange positions of central bank reserves and central government debt portfolios and optimization of the net position. The proposed model is tested, using the foreign exchange reserve and external debt data of seven countries (Albania, Ghana, FYR Macedonia, South Africa, the Republic of Korea, Tunisia, and Uruguay). The paper employs quantitative methods to explore the impact of an overarching asset and liability management strategy and integrated approach on the efficient management of foreign exchange risk. It provides policy recommendations on ways to minimize the risk of foreign exchange mismatches and increase the return on foreign exchange reserves.

Asset --- Debt Markets --- Exchange Rate Risk --- Finance and Financial Sector Development --- International Reserves --- Liability --- Macro Hedging --- Management --- Portfolio Optimization --- Public Debt --- Public Sector Development --- Sovereign Balance Sheet --- Strategic Asset Allocation