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The 1990s Institutional Reform of Monetary Policy in Latin America

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  • Agustín Carstens
  • Luis I. Jácome

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 potential risks for the success of monetary policy in Latin America.

Suggested Citation

  • Agustín Carstens & Luis I. Jácome, 2005. "The 1990s Institutional Reform of Monetary Policy in Latin America," Working Papers Central Bank of Chile 343, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:343
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    References listed on IDEAS

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    Cited by:

    1. Luis Jácome & Eric Parrado, 2006. "The Quest for Price Stability in Central America and the Dominican Republic," Working Papers Central Bank of Chile 390, Central Bank of Chile.

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