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Financial conditions indices in Latin America

Author

Listed:
  • Eduardo Amaral
  • Rafael Guerra
  • Ilhyock Shim
  • Alexandre Tombini

Abstract

Global factors shaped financial conditions in Latin America in 2025, with exchange rate appreciations against the US dollar loosening conditions in most countries. Short-run monetary policy transmission in the region operates through financial conditions. In general, monetary easing leads to looser financial conditions and faster short-term output growth. Measurement of overall financial conditions depends on the methodologies and assumptions used to construct financial conditions indices (FCIs). Understanding these differences helps central banks to use FCIs as an input to monetary policy.

Suggested Citation

  • Eduardo Amaral & Rafael Guerra & Ilhyock Shim & Alexandre Tombini, 2025. "Financial conditions indices in Latin America," BIS Bulletins 113, Bank for International Settlements.
    • Handle: RePEc:bis:bisblt:113
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    References listed on IDEAS

    as
    1. Rey, Hélène, 2015. "Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence," CEPR Discussion Papers 10591, C.E.P.R. Discussion Papers.
    2. Alexandre Tombini & Ana Aguilar & Jon Frost & Christian Upper & Fabrizio Zampolli, 2023. "Lessons from 20 years of central banking in the Americas," BIS Papers chapters, in: Bank for International Settlements (ed.), Central banking in the Americas: Lessons from two decades, volume 127, pages 3-20, Bank for International Settlements.
    3. Gaston Gelos & Pietro Patelli & Ilhyock Shim, 2024. "The US dollar and capital flows to EMEs," BIS Quarterly Review, Bank for International Settlements, September.
    4. Mr. Nicolas Arregui & Mr. Selim A Elekdag & Mr. Gaston Gelos & Romain Lafarguette & Dulani Seneviratne, 2018. "Can Countries Manage Their Financial Conditions Amid Globalization?," IMF Working Papers 2018/015, International Monetary Fund.
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