The empirical literature on long-run real exchange rate behavior has shown mixed evidence due to problems involving the lack of long time series data and the low power of time-series unit root tests in small samples. The main objective of the present paper is to tackle these empirical issues by...

FDI flows to developing countries surged in the 1990s, to become their leading source of external financing. This rise in FDI volume was accompanied by a marked change in its composition: investment taking the form of acquisition of existing assets (M&A) grew much more rapidly than investment in...

The main goal of the present paper is to estimate the equilibrium real exchange rate path for Chile using a simple model for the 1977.I – 2003.III period. Using cointegration techniques, we find a cointegrating relationship between the real exchange rate (RER) and its fundamentals —that is,...

Latin American has lost substantial ground relative to other developing and developed regions in terms of the quality and quantity of infrastructure over the last two decades. For instance, Latin America’s infrastructure gap in infrastructure growth relative to that of the seven successful...

This paper provides an empirical evaluation of the impact of infrastructure development on economic growth and income distribution using a large panel data set encompassing over 100 countries and spanning the years 1960-2000. The empirical strategy involves the estimation of simple equations for...

This paper evaluates the impact of non-monetary factors on inflation for a sample of 97 countries over the period 1975-2005. We complement and extend the existing literature in the following dimensions: (i) we assemble a comprehensive set of inflation determinants classified in 5 groups — high...

Strong swings in business cycle conditions in industrial and emerging market economies (EMEs) alike have renewed the debate on effectiveness of stabilization policies. Traditionally it has been argued that EMEs are unable to pursue counter-cyclical monetary and fiscal policies due to financial...

The main goals of the present report are: first, describe the main stylized facts of growth in Latin America and the Caribbean (LAC) countries compared to typical countries in the world over the 1960-2000 period. Second, we attempt to explain the economic growth performance in LAC countries...

There is a long-standing literature that shows that fiscal adjustment is often implemented through cuts in public investment, including infrastructure (Roubini and Sachs, 1989; Hicks, 1991; De Haan et al. 1996). In this respect, the present paper aims to provide a comprehensive overview of the evolution...

Choosing an exchange rate regime is one of the most important decisions in macroeconomic policymaking. Some countries may peg their currency to gain credibility and control domestic inflation, while others may be more prone to float due to the larger incidence of real shocks. In spite of the...