Macroprudential agenda for middle-income countries in Latin America and the Caribbean will develop a macroprudential regulatory agenda for MICs in Latin America and the Caribbean. Many MICs in the region that lack the fiscal space to effectively respond to the exigencies of the COVID-19 pandemic, have also limited access to concessional financing. In addition, many of them that until the COVID-19 outbreak enjoyed access to international capital markets have been unable to refinance maturing loans or raise new funds as financial conditions have worsened. Home to 75% of the world’s population and 62% of the world’s poor, MICs are highly vulnerable to a debt crisis, lost market access and capital outflows.
This paper provides a critical assessment of macroprudential policies at the theoretical and practical levels focussing on the case of developing economies, including Africa, Asia and particularly Latin America and the Caribbean. It argues that macroprudential regulation remains an elusive concept and is of limited applicability.
The growth of developing economies is constrained by the performance of the external sector. Countries face an external constraint when their performance (current and expected) in external markets and the response of the financial markets to this (current and expected) performance delimit and restrict their scope for conducting domestic policies, including fiscal, exchange-rate and monetary policy.
In this report, we stress the importance of structural change and productive development as leading engines of post-Covid economic recovery. We do so by first putting emphasis on the perverse relation between underdeveloped productive structures and the intensity of the Covid-19 crisis. We then look at factors that may have harmed productive development in emerging and developing (EDE) countries over the last forty years.
In 2020, the Latin American and Caribbean region faced the worst crisis on historical record and the sharpest economic contraction (-7.7% and -20%, respectively, in GDP and investment growth for 2020) within the developing world. The available data also show that the contraction of investment relative to that of GDP was greater in Latin America and the Caribbean than in other developing regions.
Macroeconomic, fiscal and taxation policies that can be implemented as part of the response to the COVID-19 crisis.