This paper studies the shift in the role of monetary policy in Latin America during the 1990s. As in most industrial economies, in Latin America there has been a refocusing of the objectives pursued by monetary policy towards the achievement of price stability. Several factors have contributed to explain this change of objectives: (1) The poor inflation record of the 1980s and the high political and economic costs it entailed; (2) The overwhelming analytical and empirical evidence which indicates that trying to achieve a permanent reduction of unemployment through monetary policy results, eventually, in an acceleration of inflation without much of a permanent effect on the unemployment rate; (3) The increasing awareness that, with forward-looking expectations and credible policies, the cost of reducing inflation is much lower than what had been previously thought; (4) The widespread consensus among economists that macroeconomic stability is a precondition for sustainable growth; and, (5) The increasing awareness that inflation gives rise to regressive taxation which mainly affects the poorest groups in the population. The reduction of inflation has been facilitated by the development of an institutional structure to maintain low inflation. In particular, two types of institutions have become popular: First, the creation of independent central banks; second, the enactment of procedures on budgetary responsibilities more conducive to fiscal discipline in order to consolidate the underpinnings for an independent monetary policy geared ultimately to achieving low inflation. The paper examines central banks’ institutional framework and the monetary policy operating procedures for a group of five Latin American countries: Chile, Colombia, Costa Rica, El Salvador and Peru.
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Article provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its journal Cuadernos de Economía.
Volume (Year): 36 (1999) Issue (Month): 109 () Pages: 897-927 Download reference. The following formats are available: HTML,
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Find related papers by JEL classification: E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Rudiger Dornbusch & Stanley Fischer, 1993.
"Moderate Inflation,"
NBER Working Papers
3896, National Bureau of Economic Research, Inc.
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