Desafíos del Manejo de la Liquidez y de los Activos Internacionales en Latinoamérica

Abstract

We analyze the degree to which the growing importance of sovereign wealth funds [SWFs], and the diffusion of inflation targeting and augmented Taylor rules have impacted the post crisis adjustment of Latin American countries to the challenges associated with terms of trade and financial shocks. We confirm that active international reserves management reduces the effects of transitory Commodity Terms of Trade (CTOT) shocks to the real effective exchange rate [REER] and the real GDP in LATAM economies. These buffer effects work more against the risks of real appreciation than against depreciations, under relatively high levels of external debt and in economies that are less open to trade. Fixed exchange regimes act as a substitute policy to reserve accumulation. In contrast to reserves, SWFs buffer the REER from CTOT shocks with fixed exchange rate regimes and in relatively closed economies