Papers by Camilo Ernesto Tovar Mora
Monetaria, 2014
This paper examines foreign exchange intervention practices and their effectiveness in containing... more This paper examines foreign exchange intervention practices and their effectiveness in containing currency appreciation, using a new qualitative and quantitative database for a panel of 15 economies covering 2004-2010, with special focus on Latin America. Qualitatively, it examines institutional aspects such as declared motives, instruments employed, the use of rules versus discretion, and the degree of transparency. Quantitatively, it assesses the effectiveness of sterilized interventions in influencing the exchange rate using a two-stage IV-panel data approach, which helps overcome endogeneity bias. Results suggest that interventions slow the pace of appreciation, but the effects decrease rapidly with the degree of capital account openness. At the same time, interventions are more effective in the context of already overvalued exchange rates.
SSRN Electronic Journal, 2006
This paper estimates a new open economy macroeconomic model for South Korea to determine the outp... more This paper estimates a new open economy macroeconomic model for South Korea to determine the output effect of currency devaluations. Three transmission mechanisms are considered: the expenditure-switching, the balance sheet, and a monetary channel associated to a nominal exchange rate target. Devaluations are defined as an increase in this target. This allows to isolate the effects of an explicit exogenous devaluationary policy shock. Ceteris paribus, a devaluation is found to be expansionary. Output contractions in South Korea should then be associated with a different shock such as an adverse shock on the international interest rate or on export demand.
IMF Working Papers, 2012
Over the past two decades, most emerging market economies witnessed two key developments. A marke... more Over the past two decades, most emerging market economies witnessed two key developments. A marked process of financial integration with the rest of the world, arguably turning these economies more vulnerable to global financial shocks; and an improvement of macroeconomic fundamentals, helping to increase their resiliency to these shocks. Against a backdrop of these opposing forces, are these economies more vulnerable to global financial shocks today than in the past? Have better fundamentals offset increasing financial integration? If so, what fundamentals matter most? We address these questions by examining the role of these two forces over the past two decades in amplifying or buffering the economic impact of these shocks. Our findings show that EMEs, with the exception of Emerging Europe, have become less vulnerable. Exchange rate flexibility and external sustainability are key determinants of the impact of these shocks, while the extent to which deeper financial integration is a source of vulnerability depends on the exchange rate regime.
IMF Working Papers, 2012
Heavy foreign exchange intervention by central banks of emerging markets have lead to sizeable ex... more Heavy foreign exchange intervention by central banks of emerging markets have lead to sizeable expansions of their balance sheets in recent years-accumulating foreign assets and non-money domestic liabilities (the latter due to sterilization operations). With domestic liabilities being mostly of short-term maturity and denominated in local currency, movements in domestic monetary policy interest rates can have sizable effects on central bank's net worth. In this paper we examine empirically whether balance sheet considerations influence the conduct of monetary policy. Our methodology involves the estimation of interest rate rules for a sample of 41 countries and testing whether deviations from the rule can be explained by a measure of central bank financial strength. Our findings, using linear and nonlinear techniques, suggests that central bank financial strength can be a statistically significant factor explaining large negative interest rate deviations from "optimal" levels.
SSRN Electronic Journal, 2009
The impact of large currency devaluations on output, as measured by the real gross domestic produ... more The impact of large currency devaluations on output, as measured by the real gross domestic product, continues to be an elusive question in the empirical macroeconomic literature. This paper aims at reexamining and providing new empirical evidence on this relationship, by using a sample covering 109 emerging market and developing economies for the period 1960-2006. In contrast with the existing empirical literature, we examine not just the impact of large nominal currency devaluations on output growth, as has been customary in the literature, but also provide estimates of how devaluationary episodes affect output trend. By doing so, we find that the devaluation-output relationship is not robust across regions and time, and that the persistence of devaluations matters. In particular, one-time devaluations induce output trend gains at ten year horizons, while successive devaluationary episodes have no impact whatsoever. A policy implication is that poorly executed devaluations induce no long-run output gains. Finally, the role of the external sector in explaining the heterogeneity of the results is examined. We find that real imports rather than exports do most of the adjustment, thus suggesting a strong expenditureswitching effect and, possibly, the emergence of export financing constraints at the time of devaluations. This last aspect highlights the need to avoid a credit crunch at the time of large currency devaluations as it might wipe out all the beneficial gains that devaluations may have on exports and, ultimately, on output.
SSRN Electronic Journal, 2009
The impact of large currency devaluations on output, as measured by the real gross domestic produ... more The impact of large currency devaluations on output, as measured by the real gross domestic product, continues to be an elusive question in the empirical macroeconomic literature. This paper aims at reexamining and providing new empirical evidence on this relationship, by using a sample covering 109 emerging market and developing economies for the period 1960-2006. In contrast with the existing empirical literature, we examine not just the impact of large nominal currency devaluations on output growth, as has been customary in the literature, but also provide estimates of how devaluationary episodes affect output trend. By doing so, we find that the devaluation-output relationship is not robust across regions and time, and that the persistence of devaluations matters. In particular, one-time devaluations induce output trend gains at ten year horizons, while successive devaluationary episodes have no impact whatsoever. A policy implication is that poorly executed devaluations induce no long-run output gains. Finally, the role of the external sector in explaining the heterogeneity of the results is examined. We find that real imports rather than exports do most of the adjustment, thus suggesting a strong expenditureswitching effect and, possibly, the emergence of export financing constraints at the time of devaluations. This last aspect highlights the need to avoid a credit crunch at the time of large currency devaluations as it might wipe out all the beneficial gains that devaluations may have on exports and, ultimately, on output.
This paper estimates a new open economy macroeconomic model for South Korea to determine the outp... more This paper estimates a new open economy macroeconomic model for South Korea to determine the output effect of currency devaluations. Three transmission mechanisms are considered: the expenditure-switching, the balance sheet, and a monetary channel associated to a nominal exchange rate target. Devaluations are defined as an increase in this target.Thisallowstoisolatetheeffects of explicit exogenous devaluationary policy shocks from any other shock to the economy. Ceteris paribus, a devaluation is found to be expansionary. Hence, the devaluation did not cause South Korea’s output contraction but rather it was a different shock.
The transformation of financing, the changing nature of financial risks and the resulting policy ... more The transformation of financing, the changing nature of financial risks and the resulting policy challenges were the main topics of a meeting on “New financing trends in Latin America: a bumpy ride towards stability ” held in Mexico City on May 26–27, 2007 and jointly organised by the Bank for International Settlements and the Federal Reserve Bank of Atlanta. This
The Economic Review of the Federal Reserve Bank of Atlanta presents analysis of economic and fina... more The Economic Review of the Federal Reserve Bank of Atlanta presents analysis of economic and financial topics relevant to Federal Reserve policy. In a format accessible to the nonspecialist, the publication reflects the work of the bank’s Research Department. It is edited, designed, and produced through the Public Affairs Department. Views expressed in the Economic Review are not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System.
BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for... more BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS.
Latin American Economics eJournal, 2009
The financial impact of the global crisis on Latin America has in some respects been less severe ... more The financial impact of the global crisis on Latin America has in some respects been less severe than in previous crises. This reflects in part the development of domestic bond markets and improved net balance sheet positions of the economies, which have allowed gross capital inflow reversals to be partially offset by reductions in gross capital outflows. In addition, policy responses have helped to ease both external and domestic financial conditions. Nevertheless, considerable risks remain due to the ongoing economic downturn.
IMF Working Papers
This paper examines the extent to which digitalization—measured by a new proxy based on IP addres... more This paper examines the extent to which digitalization—measured by a new proxy based on IP addresses allocations per country—has influenced inflation dynamics in a sample of 36 advanced and emerging economies over 2000-2017. Phillips curve estimates show that digitalization has a statistically significant negative effect on inflation in the short run. Its economic impact is not large but has increased since 2012 and mainly operates through a cost/competition channel. Principal components and cointegration analysis further suggest digitalization is a key driver of lower trend inflation.
Over the past 15 years there has been remarkable progress in the specification and estimation of ... more Over the past 15 years there has been remarkable progress in the specification and estimation of dynamic stochastic general equilibrium (DSGE) models. Central banks in developed and emerging market economies have become increasingly interested in their usefulness for policy analysis and forecasting. This paper reviews some issues and challenges surrounding the use of these models at central banks. It recognises that they offer coherent frameworks for structuring policy discussions. Nonetheless, they are not ready to accomplish all that is being asked of them. First, they still need to incorporate relevant transmission mechanisms or sectors of the economy; second, issues remain on how to empirically validate them; and finally, challenges remain on how to effectively communicate their features and implications to policy makers and to the public. Overall, at their current stage DSGEmodels have important limitations. How much of a problem this is will depend on their specific use at cen...
INTL: Managing in Emerging Markets (Topic), 2007
Securitisation can transform ordinarily illiquid or risky assets into more liquid or less risky o... more Securitisation can transform ordinarily illiquid or risky assets into more liquid or less risky ones. Despite the recent rapid growth of securitisation, the Latin American market remains in its infancy, as reflected in the size and type of assets involved in transactions. Because of its benefits, further encouragement should be given to promoting this financing technique in the region. However, careful attention should also be paid to the associated risks.
The transformation of financing, the changing nature of financial risks and the resulting policy ... more The transformation of financing, the changing nature of financial risks and the resulting policy challenges were the main topics of a meeting on “New financing trends in Latin America: a bumpy ride towards stability” held in Mexico City on May 26–27, 2007 and jointly organised by the Bank for International Settlements and the Federal Reserve Bank of Atlanta. This introduction is an overview of selected issues discussed by central banks, finance ministries, multilateral institutions, academics and private sector participants.
Durante la decada pasada, las autoridades de politica economica en America Latina han adoptado va... more Durante la decada pasada, las autoridades de politica economica en America Latina han adoptado varios instrumentos macroprudenciales para controlar la prociclicidad del credito al sector privado y para contener riesgos sistemicos. En particular, los requerimientos de encaje han sido empleados activamente. A pesar de su uso extendido, poco se sabe acerca de su efectividad y de como interactuan con la politica monetaria. Este estudio reporta evidencia para paises latinoamericanos sobre como los requerimientos de encaje influencian el crecimiento del credito bancario. Los resultados muestran que estos instrumentos tienen un efecto moderado y transitorio, asi como un rol complementario con la politica monetaria.
Latin American Business eJournal, 2005
Governments in Latin America have traditionally faced significant difficulties in issuing debt de... more Governments in Latin America have traditionally faced significant difficulties in issuing debt denominated in local currency in international markets. However, three countries in the region have recently issued this type of debt, perhaps signalling a permanent change in the manner in which Latin American borrowers tap international bond markets. Nonetheless, the degree to which issuing international debt in local currency complements the development of domestic debt markets remains to be seen.
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Papers by Camilo Ernesto Tovar Mora