Latin American dollar debts could cause systemic risk, paper says
Authors say the Fed risks a major policy mistake if it ignores the wider impact of tighter US policy
The dollar debt of Latin American companies has risen much faster than exports over the past decade and now represents a major financial stability risk, a new working paper warns.
Authors Iader Giraldo and Philip Turner say that if central banks including the Federal Reserve ignore the warning signs, they risk making a major policy mistake.
The paper, published by the Fondo Latinoamericano de Reservas examines data from 160 Latin American companies. It says this shows warning signs based on
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