Banks' liquidity holdings are comfortably above legal or prudential requirements in most Central American countries. While good for financial stability, high systemic liquidity may nonetheless hinder monetary policy transmission and financial markets development. Using a panel of about 100 commercial banks from the region, we find that the demand for precautionary liquidity buffers is associated with measures of bank size, profitability, capitalization, and financial development. Deposit dollarization is also associated with higher liquidity, reinforcing the monetary policy and market development challenges in highly dollarized economies. Improvements in supervision and measures to promote dedollarization, including developing local currency capital markets, would help enhance financial systems' efficiency and promote intermediation in the region.

Adequate infrastructure is a critical input for growth and development in all countries, and especially in emerging and developing countries. This article 1 1 The views expressed in this article are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. examines the factors that have underpinned the stock of infrastructure across countries, including in Latin America and the Caribbean. We find that public finance and private sector participation both contribute to improving the stock of infrastructure. The impact of public finance depends on how capital investment is financed to meet the government’s budget constraint. Total domestic finance of infrastructure depends, in turn, on domestic financial depth and links to the rest of the world through trade and foreign investment.

Inadequate infrastructure has been widely viewed as a principal barrier to growth and development in Latin America and the Caribbean. This paper provides a comprehensive overview of infrastructure in the region and highlights key areas in which infrastructure networks can be enhanced. The public and private sectors play complementary roles in improving the infrastructure network. Therefore, it is critical to strengthen public investment management processes as well as the regulatory framework, including to ensure and appropriate mix of financing and funding for projects and to address environmental concerns.

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Spain is experiencing sustained economic and social disparities in several areas. Social spending policies have a heightened responsibility to respond but are challenged by high public debt and pressures from an aging society. This study takes stock of the level and effectiveness of public social expenditure from a cross-country and macroeconomic view, complementing recent targeted spending reviews. The results suggest that social protection spending should aim to improve redistribution through better targeting the most vulnerable while more effective education and active labor market policies should aim to create more equal opportunities and income prospects. In some areas more fiscal resources are needed. But social spending alone cannot reduce inequality, and efforts also should be directed toward making the labor market more inclusive.