Commodity Speculation and Exchange Rate Swings in Latin America: a Stock Flow Consistent (SFC) Analysis
Lorenzo Nalin () and
Giuliano Toshiro Yajima ()
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Lorenzo Nalin: National Autonomous University of Mexico (UNAM)
No 13/19, Working Papers from Sapienza University of Rome, DISS
We are investigating the role of speculative agents during a commodity-boom period in a small-open, peripheral economy. Latin American countries (LAs) have a long history of speculative attacks, balance of payments crises, and currency devaluations. At the beginning of the 2000s, LAs experienced rising commodity prices and foreign investors shifted part of their portfolio composition towards their securities in search of short-term capital gains. Unlike past episodes, financialization has allowed international investors to have a wider range of financial instruments in which to invest. Apart from the traditional government bonds, new asset categories have appeared such as derivatives, exchange traded funds and structured notes. In order to replicate this macro-financial episode, this work will adopt a Stock Flow Consistent (SFC) framework. International real-financial connections are one of the main issues tackled by this methodology, as put forward in Godley (1999). The element of novelty of our contribution consists in depicting a speculative financial sector, which issues commodity-based assets (CBAs) to be sold to rentier households in the developed country. Comparative static exercises with different scenarios will be performed.
Keywords: International Finance Forecasting and Simulation: Models and Applications; Foreign Exchange; Macro-Based Behavioural Economics (search for similar items in EconPapers)
JEL-codes: E7 F31 F37 (search for similar items in EconPapers)
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