Latin American Central Bank Reform: Progress and Challenges

44 Pages Posted: 3 Mar 2006  

Agustín Carstens

affiliation not provided to SSRN

Luis I Jácome

International Monetary Fund (IMF)

Date Written: June 2005

Abstract

This study takes stock of the institutional reform of monetary policy in Latin America since the early 1990s. It argues that strengthening the legal independence of central banks, together with macroeconomic policies, was instrumental in reducing inflation from three-digit annual rates in the 1990s to single-digit territory in 2004. The paper also discusses the main challenges of monetary policy today, namely, achieving price stability, restoring market confidence in domestic currencies, and sticking to policy consistency despite adverse effects of the volatility of capital flows. Finally, recurrent banking crises and lack of fiscal discipline are identified as the main risks for the success of monetary policy in Latin America.

Keywords: Central bank independence, inflation, monetary policy, Latin America

JEL Classification: E42, E52, E58

Suggested Citation

Carstens, Agustín and Jácome, Luis I, Latin American Central Bank Reform: Progress and Challenges (June 2005). IMF Working Paper, Vol. , pp. 1-44, 2005. Available at SSRN: https://ssrn.com/abstract=887983

Agustín Carstens (Contact Author)

affiliation not provided to SSRN

No Address Available

Luis I Jácome

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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