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Seminar with Francisco Santos

The Impact of Normalization of U.S. Monetary Policy on Latin America

Event Details:

Thursday, June 21, 2018
4:30pm - 6:00pm PDT

On June 21, the Stanford King Center on Global Development held a seminar with one of its visiting scholars, Francisco Santos, a researcher at the Institute for Applied Economic Research (IPEA).

Using monthly data between January 2002 and September 2017, Santos analyzes the impact of U.S. monetary spillovers to interest rates and foreign exchanges of four EMEs: Brazil, Chile, Colombia, and Mexico. Among currencies, the estimates point to larger monetary policy spillovers after the Global Financial Crisis (GFC) as all the exchange rates respond with excess depreciation to positive U.S. interest rate shocks. Concerning domestic interest rates, the structural break in spillovers is particularly significant in Mexico, while the responses from Brazil, Chile, and Colombia are compatible with higher degrees of monetary autonomies. Based on the expected path of U.S. monetary policy normalization, Santos offers numerical forecasts of the potential spillover effects to each of the four countries of the study, highlighting the potential spillover to 360-day Mexican interest rates of approximately 225 basis points in the following two years and the potential depreciation of the Brazilian currency, which could amount to 15%.

 

About the speaker:

Francisco Santos

Francisco Santos is a tenured researcher at the Institute for Applied Economic Research (IPEA), a Brazilian government-led economic research organization. He is also an economics professor at Pontifical Catholic University of Rio de Janeiro and formerly served as financial analyst at the open market desk of Central Bank of Brazil. Santos’s field of expertise is monetary policy and international finance. His work in progress includes the study of foreign exchange interventions and the estimation of the impact of the normalization of U.S. monetary policy on emerging financial markets. He holds a Ph.D. in Economics from Pontifical Catholic University of Rio de Janeiro and his doctoral dissertation addresses various aspects related to microstructure of financial markets using high frequency data.

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