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A baseline stock-flow model for the analysis of macroprudential regulation for Latin America and the Caribbean

Author

Listed:
  • Esteban Ramon Perez Caldentey
  • Lorenzo Nalin
  • Leonardo Rojas

Abstract

This paper provides a critical view of macroprudential regulation/policies found in mainstream and post-Keynesian economics. The paper provides a macroeconomic framework that can be used as a basis for the analysis of macroprudential guidelines and policies. It is based on on five main principles/guidelines: (i) financial fragility is endogenous and results from the normal functioning of market based economies driven by the profit motive; (ii) financial fragility can originate in the financial and real sectors of an economy; (iii) financial cycles are not necessarily driven by boom and busts and financial fragility need not originate in an economic boom; (iv) macroprudential policies should be viewed from a dynamic perspective, that is they must take into account the changes in the international financial architecture/structure and be region/country specific; and (v) macroprudential regulation/guidelines requires a truly macroeconomic framework. These principles are captured in the specification of a baseline stock-flow model for Latin America and the Caribbean with five sectors (government, central bank, financial sector, private sector, and external sector). The model is a tool that can be used for evaluating other macroprudential policies.

Suggested Citation

  • Esteban Ramon Perez Caldentey & Lorenzo Nalin & Leonardo Rojas, 2022. "A baseline stock-flow model for the analysis of macroprudential regulation for Latin America and the Caribbean," Working Papers PKWP2217, Post Keynesian Economics Society (PKES).
    • Handle: RePEc:pke:wpaper:pkwp2217
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    File URL: https://www.postkeynesian.net/downloads/working-papers/PKWP2217.pdf
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    References listed on IDEAS

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    Cited by:

    1. Juan Carlos Moreno-Brid & Lorenzo Nalin & Edgar Pérez-Medina, 2022. "External challenges to the economic expansion of emerging markets in the post-COVID 19 and post-COP26 era: A balance-of-payments constrained growth (BPCG) perspective," PSL Quarterly Review, Economia civile, vol. 75(303), pages 313-354.

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    More about this item

    Keywords

    Debt; external constraint; external financial cycle; financial flows; Latin America and the Caribbean; microprudential and macroprudential regulation; stock-flow;
    All these keywords.

    JEL classification:

    • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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