Policy Instruments to Lean Against the Wind in Latin America

By G. Terrier, Rodrigo O. Valdes, Camilo E Tovar Mora, Jorge A Chan-Lau, Carlos Fernandez Valdovinos, Mercedes Garcia-Escribano, Carlos I. Medeiros, Man-Keung Tang, Mercedes Vera Martin, W. Christopher Walker

July 1, 2011

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G. Terrier, Rodrigo O. Valdes, Camilo E Tovar Mora, Jorge A Chan-Lau, Carlos Fernandez Valdovinos, Mercedes Garcia-Escribano, Carlos I. Medeiros, Man-Keung Tang, Mercedes Vera Martin, and W. Christopher Walker Policy Instruments to Lean Against the Wind in Latin America, (USA: International Monetary Fund, 2011) accessed June 17, 2025

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper reviews policy tools that have been used and/or are available for policy makers in the region to lean against the wind and review relevant country experiences using them. The instruments examined include: (i) capital requirements, dynamic provisioning, and leverage ratios; (ii) liquidity requirements; (iii) debt-to-income ratios; (iv) loan-to-value ratios; (v) reserve requirements on bank liabilities (deposits and nondeposits); (vi) instruments to manage and limit systemic foreign exchange risk; and, finally, (vii) reserve requirements or taxes on capital inflows. Although the instruments analyzed are mainly microprudential in nature, appropriately calibrated over the financial cycle they may serve for macroprudential purposes.

Subject: Balance of payments, Banking, Capital inflows, Financial institutions, Foreign exchange, Loans, Monetary policy, Mortgages, Reserve requirements

Keywords: Bank, Capital inflows, Central America, Credit risk, DTI limit, Eastern Europe, Europe, FX credit risks, FX exposure, FX lending, FX risk, Global, Loans, Mortgages, North America, Rate, Reserve requirements, RR, RR regulation, WP

Publication Details

Pages:

113
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/159
Stock No:

WPIEA2011159
ISBN:

9781455297726
ISSN:

1018-5941

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