Seminar on the World Bank and the International Finance Corporation
September, 1959, Washington D.C., U.S.A.

CEMLA since 1952 is the Association of Central Banks of Latin America and the Caribbean.

Our main objectives are: To promote a better understanding of monetary and banking matters; help with improving the training of central bank staff; conduct research and systematize the results, and provide information to members about events of international and regional interest in the areas of monetary and financial policies.

News

Accounting and auditing of credit loss estimates: The hard and the soft

Latin American Journal of Central Banking, Volume 2, Issue 1

The Latin American Journal of Central Banking, which has open access, has published a new policy paper entitled “Accounting and auditing of credit loss estimates: The hard and the soft”. The author explores how auditing could led bank management to challenge the estimation and recognition of Estimated Credit Losses (ECL) by only focusing on hard data from financial reporting and dismissing relevant information from auditing notes and public disclosures. The author proposes a combination of approaches to ensure that financial reporting accurately reflect the health of global systemically important banks (G-SIBs).

 

Foreign Currency Intermediation: Systemic Risk and Macroprudential Regulation

Latin American Journal of Central Banking, Volume 2, Issue 1

The Latin American Journal of Central Banking, which has open access, has published a new policy paper entitled “Foreign Currency Intermediation: Systemic Risk and Macroprudential Regulation”. The author explains the trade-off between the (positive) effect of foreign currency intermediation on growth in tranquil times and its (negative) effect in terms of financial fragility. He discusses the advantages of FX intermediation associated macroprudential measures over price-related measures in dealing with liquidity and FX systemic risks and shows that neutralizing systemic risks is possible without aiming at directly limiting or banning foreign currency intermediation (dedollarization).

 

Joint Special Issue of the Latin American Journal of Central Banking and the Finance Research Letters

The Latin American Journal of Central Banking and the Finance Research Letters invite the CEMLA community to submit research papers for a special issue on “New Advances in Credit Risk”. Papers on bank credit risk, counterparty credit risk, credit risk measurement modelling, portfolio credit risk, credit risk liquidity, credit risk analysis models, transmission and contagion, credit risk management, credit risk and sustainable finance, are encouraged to be submitted to this Call for Papers.

 

In the first quarter of 2021, the United States economy generated 256 thousand jobs for Mexican immigrant workers

Jesús A. Cervantes González y Cindy Sánchez Ricardo, Nota de Remesas 6/2021

In the United States, as a consequence of the COVID-19 pandemic, employment of Mexican immigrant workers declined sharply in the months of March and April 2020, but began to recover in May. During the first three months of the current year, employment of Mexican immigrant workers in the United States increased by 256,000 occupations. In fact, at the end of March 2021, there was already an increase of 275,000 jobs compared to March 2020.


XIV Meeting on International Reserves Management

The XIV took place on April 14, 15 and 16. Manuel Ramos-Francia (CEMLA) gave the opening remarks. For her part, Anna Nordstrom (FRBNY) provided an overview of the Federal Reserve’s facilities to support global USD liquidity. Emiliano González Mota (Banco de España) focused on the challenges the managers of international reserves (IR) have been facing in the context of the monetary policy response to COVID-19. Gerardo García López (Banco de México) explained their IR management. Pamela Cardozo Ortiz (Banco de la República) described their approach to managing IR. Beltrán de Ramón (Banco Central de Chile), presented a plan to accumulate IR. Monika Znidar (ECB) provided an overview of the ECB’s IR management. The meeting included a public-private dialogue, and there were three invited talks. At the end, there was a Policy Round Table

 

IV Meeting of the Fintech Forum

The Fintech Forum held its IV plenary meeting from March 23 to 25, 2021, to share experiences and knowledge regarding the evolution of financial technologies and their implications for the central banking community. 

Central Bank Digital Currencies (CBDC), Global Stablecoins, bigtechs and sustainable digital finance, were the discussed topics. Dr. Manuel Ramos-Francia, Director General of CEMLA, delivered an opening speech to the Forum on foundational aspects of money and the possible introduction of both, public and private digital forms of fiat money. The keynote speaker, Dr. Hyun Song Shin, Economic Adviser and Head of Research at the Bank for International Settlements, discussed how new financial technologies could shift traditional financial and payment services.

The Fintech Forum concluded with a roundtable for the Members to be updated on current developments of the regional central banking community to embrace the fintech phenomenon with a more active regulation and surveillance.

 

Pricing the exotic: Path-dependent American options with stochastic barriers

Latin American Journal of Central Banking, Volume 2, Issue 1

The Latin American Journal of Central Banking, with open access, has published a new paper entitled “Pricing the exotic: Path-dependent American options with stochastic barriers”. In this paper, the authors propose a new approach to approximate the value of an American option through an extension of the Black and Scholes (1973) and Merton (1973) models, by considering different features behind currency options employed by the Central Bank of Colombia. The authors argue that this methodology could have useful applications for active practitioners employing currency derivatives and allow central banks to evaluate (ex-ante) the expected option price and the channels through which dynamic hedging operates in complex instruments.

 

Should monetary policy lean against the wind in a small-open economy? Revisiting the Tinbergen rule

Latin American Journal of Central Banking, Volume 2, Issue 1

The Latin American Journal of Central Banking, with open access, has published a new paper entitled “Should monetary policy lean against the wind in a small-open economy? Revisiting the Tinbergen rule”. This paper examines the interaction between monetary and macroprudential policies and contributes to the debate on policymakers’ response to financial imbalances in the context of a small open economy model that features both financial frictions and sticky prices. The author finds that macroprudential policies could help monetary policy stabilize the economy in the face of a financial shock. Besides, he finds that infringing the Tinbergen rule entails large welfare costs, and these costs are higher in an open economy than in a closed economy.

 

Characterization of the Chilean financial cycle, early warning indicators and implications for macro-prudential policies

Latin American Journal of Central Banking, Volume 2, Issue 1

The Latin American Journal of Central Banking, with open access, has published a new paper entitled “Characterization of the Chilean financial cycle, early warning indicators and implications for macro-prudential policies”. The authors analyze the indicators’ design aspects in order to implement countercyclical capital buffer (CCyB), based on the Basel Committee recommendations. They focus their analysis on adapting the data and measuring the predictive power of different early warning indicators (EWIs). The authors conclude that the CCyB is an alternative macroprudential policy, but there are important methodological challenges that should not be underestimated to properly inform the authorities’ decision-making process.

 

Impact of extreme weather episodes on the Philippine banking sector – Evidence using branch-level supervisory data

Latin American Journal of Central Banking, Volume 2, Issue 1

The Latin American Journal of Central Banking, which has open access, has published a new paper on climate-related events and their effects on the financial system. The authors find evidence of a deterioration of loan quality as savings and time deposit liabilities contract and nonperforming loans surge following extreme rainfall events from 2014 to 2018 by using data at the level of bank branches. These findings provide compelling evidence that the financial system is not impervious to the effects of natural disasters. The results on financial performance of banks suggest that there are indeed direct and indirect costs to the banks that can seriously affect the operations and health of the financial institutions in the presence of extreme weather events.

 

In the first two months of 2021, the employment of Mexican immigrant workers in the United States continued to advance

Jesús A. Cervantes González and Cindy Sánchez Ricardo, Nota de Remesas 5/2021

The note analyzes the improvement in the employment of Mexican immigrant workers in the United States. This improvement has mitigated the sharp drop in employment that occurred as a result of the COVID-19 pandemic in March and April 2020. In addition, their unemployment rate has dropped significantly and remains below that of the Latino population.  The note also compares Mexico's remittance income with some macroeconomic aggregates and highlights that in 2020, remittances increased relative to GDP and private consumption and exceeded public investment.


Implementing a retail CBDC: Lessons learned and key insights

Latin American Journal of Central Banking, Volume 2, Issue 1

The Latin American Journal of Central Banking, which has open access, has published a new policy paper on Central Bank Digital Currencies (CBDC). It contributes to inform policymakers on the lesson learned from recently launched CBDC pilot programs. The authors found that despite differences among jurisdictions, a series of key insights on the design, operation and implementation of a CBDC, emerge from these experiences that could be useful for those exploring the possibility to launch a CBDC.

 

The COVID-19 Pandemic and Remittances to Latin America and the Caribbean in 2020

René A. Maldonado Gonzáles, Jeremy Harris and Fermín Vivanco, Nota de Remesas 4/2021

Contrary to the estimates that existed at the beginning of 2020, which foresaw a significant reduction at annual rate in the flow of remittances for that year (some of the estimates were of a 20% reduction), the information at the end of 2020 the remittance flows received by LAC countries would have reached US$101.5, that is a growth of 8.3% compared to the flows of the previous year, similar to what was observed in 2019.

 

A decisive factor for this behavior was the financial support that many countries have given to workers – including migrants – affected by the pandemic. This support mitigated the loss of income, and together with the use of their savings allowed migrants from Latin America and the Caribbean to send money to relatives, for whom, remittances often became the main source of income.

 

International migration, remittances and financial inclusion. The case of the Republic of Peru

Salvador A. Bonilla Leal, Program of Remittances and Financial Inclusion

This document presents the results of a survey that was applied at the Jorge Chávez International Airport, in the city of Lima, Peru, to non-resident Peruvian citizens who visited the country on the occasion of the 2018 December festivities. The theme of the The survey covered various aspects of the profile of these migrants, such as gender, age, education, sector of activity in which they work abroad and income levels, remittances and, where appropriate, the amount of transfers, as well as indicators of financial inclusion.

 

Half of the households in the United States with a Mexican immigrant population own their home

Jesús A. Cervantes Gónzalez, Nota de Remesas 3/2021

Mexican emigration to the United States and the employment and income opportunities they have obtained have allowed them to accumulate wealth by acquiring real estate in that country. In fact, the percentage on Mexican immigrant households with their own home was 50 per cent in 2019. Likewise, 58 per cent of such owned homes paid mortgage, so they had mortgage credit. The median value of such owned homes was in that year $177,800. 

 

Environmental risk analysis (ERA) in the strategic asset allocation (SAA) of the international reserves (IRs) managed by central banks (CBs)

Latin American Journal of Central Banking, Volume 2, Issue 1

The Latin American Journal of Central Banking, which has open access, has published a new paper on environmental risk analysis for international reserves management by central banks. The authors, from the Universidade Federal da Bahia, propose an analytical framework for the evaluation of the environmental risk exposure of an investment portfolio of a central bank, under a Strategic Asset Allocation (SSA) approach. They argue that for each viable investment portfolio, a central bank should use scenarios of environmental risks and that the risk and return relationships in each scenario should be assessed based on environmental factors.

 

New advance in December 2020 in the employment of Mexican immigrant workers in the United States

Jesús A. Cervantes Gónzalez, Nota de Remesas 2/2021

During December 2020, the American economy continued increasing employment for Mexican immigrant workers. In December employment of Mexican immigrant workers reached 6,823,729 persons and was made up of 4,540,814 men and 2,282,915 women. The improvement of such employment has strengthened the wage bill of those workers and therefore their financial resources to send remittances to Mexico.

 

Winner of the 2020 Central Bank Award Rodrigo Gómez

CEMLA's Board of Governors decided to grant the 2020 Rodrigo Gómez Central Banking Award to Rogelio De La Peña Magaña for his study: "Should Monetary Policy Lean Against the Wind in a Small-Open Economy? Revisiting the Tinbergen Rule." In turn, the Governing Board recognized with honorable mentions, respectively, Luis Alejandro Rojas Bernal and Mauricio Villamizar Villegas, for their work: "Pricing the Exotic: Path-Dependent American Options with Stochastic Barriers," and Luis Simon Tamborrel for "Capital Requirements in a Model of Bank Runs: The 2008 Run on Repo."  

 

In the period of May-November 2020, the employment of immigrant Mexican workers in the United States increased by one million one hundred thirty one thousand occupations

Jesús A. Cervantes Gónzalez, Nota de Remesas 1/2021

During November 2020, the  American economy continued increasing employment for Mexican immigrant workers. In November employment of Mexican immigrant workers reached 6,749,623 persons and was made up of 4,461,438 men and 2,288,185 women. Likewise, its unemployment rate fell to 7.8%, which was its seventh consecutive monthly decline.

 

I Course on Financial Market Infrastructures

The Center for Latin American Monetary Studies (CEMLA) and the Banco de España held the I Course on Financial Market Infrastructures in digital format, from November 23 to 27, 2020. The Course aimed at enriching the knowledge of the participants on the design, operation, regulation and oversight of financial market infrastructures by presenting and discussing different current issues. There was a special focus on advanced analytical tools to monitor and design payment and market infrastructures, using network analysis, machine learning and asset pricing techniques. Participants discussed in a roundtable some of the main challenges facing central banks to maintain the safety and efficiency of payment systems and market infrastructures, given the developments that are taking place at the international level.

 

The great exchange: Rapid demonetization in Trinidad and Tobago

Latin American Journal of Central Banking, Volume 1, Issues 1–4

The Latin American Journal of Central Banking, with open access, has published a new paper on demonetization and its implications for cash demand. Dr. Alvin Hilaire, Governor of the Central Bank of Trinidad and Tobago, and his co-author, Dr. Reshma Mahabir, provide an early evaluation of a demonetization strategy to reduce financial crimes. They argue that the strategy impacted on “black money”, as over 5 per cent of the demonetized notes not being presented for exchange. The early evidence suggests that the exercise affected the demand for cash for transactions and savings.

 

Fiscal sustainability: The case for Jamaica

Latin American Journal of Central Banking, Volume 1, Issues 1–4

The Latin American Journal of Central Banking (open access) has published a new policy paper on fiscal sustainability. It assesses the sustainability of the Jamaican fiscal policy in the context of a recent economic reform program. It documents that Jamaica's debt is very vulnerable to sharp exchange rate depreciations and that, in the long run, a primary surplus of 4.8 percent of its GDP would be needed to achieve a public debt-to-GDP ratio of 60 percent.

 

Monetary policy and financial stability in emerging market economies

Latin American Journal of Central Banking, Volume 1, Issues 1–4

The Latin American Journal of Central Banking (open access) has published a new paper on the interplay of monetary policy and financial stability. The authors discuss the interaction of monetary policy and financial stability in emerging market economies (EMEs). They consider such a relationship in EMEs arguing that their central banks face more complex trade-offs given a strong dependence to capital inflows.

 

Assessing public debt sustainability for Costa Rica using the fiscal reaction function

Latin American Journal of Central Banking, Volume 1, Issues 1–4

The Latin American Journal of Central Banking (open access) has published a new paper on public debt sustainability. The authors assess Costa Rica's public debt sustainability empirically using three complementary approaches. One of their main results indicate that given a recent major fiscal reform, the maximum level of the debt-GDP ratio will be 68% in 2026, after which this upward trend reverses.

 

Macroprudential policy analysis in an estimated DSGE model with a heterogeneous banking system: An application to Chile

Latin American Journal of Central Banking, Volume 1, Issues 1–4

The Latin American Journal of Central Banking, which has open access, has published a new paper on analysis of macroprudential policies using DSGE models. The authors quantify the effect of macroprudential policy in mitigating domestic and foreign shocks to a small, open commodity-based economy. They find that these shocks affect large and small banks differently and that countercyclical capital buffer as well as the liquidity coverage ratio need to be introduced jointly to ensure financial stability.

 

 

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Calendar for 2021Training and formation activities on economic and central banking topics

PublicationsSelection of publications that analyze the main financial and monetary topics of the central bank of the region.

Rodrigo Gómez
Central Bank Award Annual award for the preparation of studies that are of interest to the central bank.

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Central BanksThe external structure includes 50 members, 30 of which are associated.

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