Conferences & Events

– final program –

a conference by the Latin America Research Group
Research Department
Federal Reserve Bank of Atlanta

November 1 and 2, 2001

Hotel Inter-Continental
Miami, Florida

Financial liberalization is among the most pressing goals for policymakers in Latin America today as policies aim at expanding, diversifying, and modernizing financial services foster participation in the global economy. However, liberalization also presents new dilemmas. Lowering barriers to entry and attracting foreign capital have led to rapid growth in capital markets but have also resulted in market uncertainty and volatility. Moreover, existing weaknesses in some financial systems have resulted in costly bank bailouts. As the Western Hemisphere becomes increasingly integrated, financial liberalization in Latin America has important implications for U.S. financial markets and the international trade outlook.

Due to space constraints, attendance at this conference is by invitation only. If you would like more information, please contact Elizabeth McQuerry at elizabeth.mcquerry@atl.frb.org.

This session examines prospects for continued capital flows to Latin America and emphasizes factors that support continuity of flows and others that support different patterns from past experiences. This discussion encompasses some analytics on the economic determinants of flows, both size and composition, and the analysis of the changes in circumstances concerning market and policymakers’ assessments as well as the international financial architecture.

This research attempts to establish a baseline for evaluating the process of financial liberalization across countries and time through the construction of a Financial Liberalization Index. The Index, which is estimated using the Kalman filter, measures the degree of financial openness in five Latin American economies by incorporating indicators characterizing the financial system. The study also correlates macroeconomic and institutional variables with the opening in each country, and compares these variables across countries. The implications of these findings for further reform will also be discussed.

A solid supervisory framework and strict application of regulations are necessary preconditions for banking sector safety and soundness at all levels. However, while domestic institutions exist as a subset of international financial regulations and ideally are complementary, their functioning is not frictionless. This session explores some areas of weak or improperly functioning institutions in the current setup, and their implications for banking sectors in Latin America. This discussion also examines areas of concern for all Latin America.

This paper examines factors behind weak or non-existent credit allocation in Latin banking sectors today and discusses whether these trends are likely to continue and what the likely impact would be. What has been the impact of the growing presence of foreign banks on this situation? The session will also discuss concerns in the region as a whole, including policy recommendations where applicable.

Since the mid-1990s, emerging market economies have gone through waves of exchange rate crises. Since their crises, some of the nations—particularly Brazil, Mexico, and Korea—have accomplished miraculous turnarounds as a result of strong policy steps. Other crisis nations seem only to have had recoveries—to the extent that they have had them at all—as a result more of good luck than effective policy. Indonesia and Russia are obvious candidates. This discussion addresses the postcrisis policy steps taken by various nations and outlines their results. Their implications for growth sustainability and applicability of such steps to future crises also receive attention. Most striking is the extent to which recoveries can proceed even though the supposed causes of the crises have not been fully addressed. The Diamond and Dyvbig-based models—in which multiple equilibria exist and a shift from one to another does not require a fundamental change—may have some explanatory power here. Finally, the duration of the bounce back is examined.

Domestic stock markets are merging into global exchanges, and new electronic forms of trading may make smaller emerging stock markets less relevant. Yet viable domestic capital markets are considered preconditions for sustainable private sector development and building pension systems throughout the region. What are the implications of this trend for emerging market countries? How relevant are emerging market equity markets and will their declining relevance have an impact on economic development?

Panelists will make opening statements focusing on the session themes and previously distributed questions. Specifically, what issues are monetary and regulatory policymakers likely to face in the future and how could they best be handled?