scarcity of saving in LATAM, thereby increasing investment and growth. Yet, the data and several case studies suggest that the … saving and investment rates tends to be a time consuming process. This also suggests that greater political instability and … polarization would induce consumers to be more cautious in increasing their saving and investment rates following a reform. Hence …

externality is embodied in aggregate investment, the optimal policy calls for subsidizing the cost of capital in the traded sector … reserves may backfire if the needed sterilization would increase the cost of investment in the traded sector …