Is Inflation Targeting Still on Target? The Recent Experience of Latin America

62 Pages Posted: 6 Jun 2013

See all articles by Luis Felipe Cespedes

Luis Felipe Cespedes

International Monetary Fund (IMF)

Roberto Chang

Rutgers University, New Brunswick/Piscataway - Faculty of Arts and Sciences-New Brunswick/Piscataway - Department of Economics; National Bureau of Economic Research (NBER)

Andres Velasco

Columbia University - School of International & Public Affairs (SIPA)

Date Written: March 2013

Abstract

This paper reviews the recent experience of a half-dozen Latin American inflation targeting (IT) nations. Repeated and large deviations from the standard IT framework are documented: exchange market interventions have been lasting and widespread; the real exchange rate has often become a target of policy, though this target is seldom made explicit; a range of other non-conventional policy tools, especially changes in reserve requirements but occasionally taxes or restrictions on international capital movements, also came into common use. As in developed nations, during the 2008-2009 crisis issues of liquidity provision took center stage. A first evaluation of the emerging modified framework of monetary policy is also attempted. In general terms, the new approach seems to have been effective, at the very least since the region weathered the crisis reasonably well. But also, and perhaps more importantly, many questions remain about the desirability of non-conventional monetary policies in Latin America.

JEL Classification: E52, E58, F41

Suggested Citation

Cespedes, Luis Felipe and Chang, Roberto and Velasco, Andres, Is Inflation Targeting Still on Target? The Recent Experience of Latin America (March 2013). IDB Working Paper No. IDB-WP-384, Available at SSRN: https://ssrn.com/abstract=2275155 or http://dx.doi.org/10.2139/ssrn.2275155

Luis Felipe Cespedes (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Roberto Chang

Rutgers University, New Brunswick/Piscataway - Faculty of Arts and Sciences-New Brunswick/Piscataway - Department of Economics ( email )

75 Hamilton Street
New Brunswick, NJ 08901
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andres Velasco

Columbia University - School of International & Public Affairs (SIPA)

420 West 118th Street
New York, NY 10027
United States

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