Monetary Policy Strategies for Latin America

67 Pages Posted: 17 May 2000 Last revised: 13 Dec 2004

See all articles by Frederic S. Mishkin

Frederic S. Mishkin

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Miguel A. Savastano

Monetary and Capital Markets Departrment

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Date Written: March 2000

Abstract

The paper examines possible monetary policy strategies for Latin America that may help lock-in the gains in the fight against inflation attained by the region during the 1990s. We start by calling for a refocus of the debate about the conduct of monetary policy away from thinking that it is about whether the nominal exchange rate should be fixed or flexible. Instead we argue that the focus should be on whether the monetary policy regime appropriately constrains discretion in monetary policymaking. This focus suggest that there are three basic frameworks that deserve serious discussion as possible, long-run strategies for monetary policy in Latin America: a hard exchange-rate peg, monetary targeting, and inflation targeting. We look at the advantages and disadvantages of each of these strategies and then examine the recent track record of monetary policy in some Latin American countries for clues as to which of the three strategies might be best suited to economies in the region.

Suggested Citation

Mishkin, Frederic S. and Savastano, Miguel A., Monetary Policy Strategies for Latin America (March 2000). NBER Working Paper No. w7617. Available at SSRN: https://ssrn.com/abstract=228088

Frederic S. Mishkin (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Miguel A. Savastano

Monetary and Capital Markets Departrment ( email )

700 19th Street NW
Washington, DC 20431
United States

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