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Monetary Policy in Latin America in the 90s

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Author Info
Vittorio Corbo
Abstract

This paper analyses Latin America’ monetary policy during the 90’s. The paper starts discussing the options that exist to carry out monetary policy, following by a discussion of the actual mechanisms chosen by the individual countries. Then, it goes on to study the main determinants of monetary policy in six countries: Chile, Colombia, Costa Rica, El Salvador, Nicaragua and Peru. For that purpose we estimate reaction functions for each country. These estimations are based on reaction functions of the form introduced by Taylor (1993) and extended by Clarida et al. (1998) in terms of forward-looking rules. We modify the framework of Clarida et. al. by using the gap between the expected and a time-dependent "target" inflation. The results show that only in the case of Chile the monetary authority uses monetary policy with a clear commitment to achieve the target inflation.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 78.

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Date of creation: Aug 2000
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Handle: RePEc:chb:bcchwp:78

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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.:
  1. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers 1908, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Guillermo A. Calvo & Carlos A. Vegh, 1999. "Inflation Stabilization and BOP Crises in Developing Countries," NBER Working Papers 6925, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Erica L. Groshen & Mark E. Schweitzer, 1996. "The effects of inflation on wage adjustments in firm-level data: grease or sand?," Staff Reports 9, Federal Reserve Bank of New York. [Downloadable!]
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  4. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December. [Downloadable!] (restricted)
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  5. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall. [Downloadable!] (restricted)
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  6. Stephen G. Cecchetti, 1998. "Policy rules and targets: framing the central banker's problem," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 1-14. [Downloadable!]
  7. Paul R. Masson, 1997. "The Scope for Inflation Targeting in Developing Countries," IMF Working Papers 97/130, International Monetary Fund.
  8. Eichengreen, Barry, 1999. "Kicking the Habit: Moving from Pegged Rates to Greater Exchange Rate Flexibility," Economic Journal, Royal Economic Society, vol. 109(454), pages C1-14, March. [Downloadable!] (restricted)
  9. Bruno, M., 1991. "High Inflation and the Nominal Anchors of an Open Economy," Princeton Studies in International Economics 183, International Economics Section, Departement of Economics Princeton University,.
  10. Aleš Bulir & Anne Marie Gulde, 1995. "Inflation and Income Distribution - Further Evidence on Empirical Links," IMF Working Papers 95/86, International Monetary Fund.
  11. Stanley Fischer, 1996. "Why are central banks pursuing long-run price stability?," Proceedings, Federal Reserve Bank of Kansas City, pages 7-34. [Downloadable!]
  12. Sebastian Edwards & Carlos A. Vegh, 1997. "Banks and Macroeconomics Disturbances under Predetermined Exchange Rates," NBER Working Papers 5977, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Dornbusch, Rudiger & Fischer, Stanley, 1993. "Moderate Inflation," World Bank Economic Review, Oxford University Press, vol. 7(1), pages 1-44, January.
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  14. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," NBER Working Papers 5893, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Andrés Elberg & Vittorio Corbo & José Tessada, 1999. "Monetary Policy in Latin America: Underpinnings and Procedures," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 36(109), pages 897-927. [Downloadable!]
  16. Richard Clarida & Mark Gertler, 1996. "How the Bundesbank Conducts Monetary Policy," NBER Working Papers 5581, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Dornbusch, Rudiger, 1992. "Lessons from Experiences with High Inflation," World Bank Economic Review, Oxford University Press, vol. 6(1), pages 13-31, January.
  18. Corbo, Vittorio & de Melo, Jaime, 1987. "Lessons from the Southern Cone Policy Reforms," World Bank Research Observer, Oxford University Press, vol. 2(2), pages 111-42, July.
  19. Cottarelli, C. & Giannini, C., 1997. "Credibility without Rules? Monetary Frameworks in the Post-Bretton Woods Era," Papers 312, Banca Italia - Servizio di Studi.
  20. Frederic S. Mishkin, 1999. "International Experiences with Different Monetary Policy Regimes," NBER Working Papers 6965, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  21. Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608.
  22. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December. [Downloadable!] (restricted)
  23. Sebastian Edwards, 1998. "Capital Inflows into Latin America: A Stop-Go Story?," NBER Working Papers 6441, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  24. Esteban Jadresic & Paul R. Masson & Paolo Mauro & Michael Mussa & Alexander K. Swoboda & Andrew Berg, 2000. "Exchange Rate Regimes in an Increasingly Integrated World Economy," IMF Occasional Papers 193, International Monetary Fund. [Downloadable!]
  25. Svensson, Lars E. O., 1999. "Inflation targeting as a monetary policy rule," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 607-654, June. [Downloadable!] (restricted)
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  26. Svensson, Lars E O, 1998. "Open-Economy Inflation Targeting," CEPR Discussion Papers 1989, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  27. Corbo, Vittorio & Fischer, Stanley, 1995. "Structural adjustment, stabilization and policy reform: Domestic and international finance," Handbook of Development Economics, in: Hollis Chenery† & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 44, pages 2845-2924 Elsevier. [Downloadable!] (restricted)
  28. Owen F. Humpage, 1994. "Central bank independence," Economic Commentary, Federal Reserve Bank of Cleveland, issue Apr 1. [Downloadable!]
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  29. Vittorio Corbo, 1998. "Reaching One-Digit Inflation: The Chilean Experience," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 123-163, November. [Downloadable!]
  30. Esteban Jadresic, 1999. "Inflation Targeting and Output Stability," IMF Working Papers 99/61, International Monetary Fund.
  31. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, Oxford University Press, vol. 6(3), pages 353-98, September.
  32. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June. [Downloadable!] (restricted)
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  33. William B. English, 1996. "Inflation and financial sector size," Finance and Economics Discussion Series 96-16, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Carlos Ibarra, 2005. "The Behavior of Interest Rate Differentials Under Shifting Exchange Rate Regimes: The Experience of Chile, Colombia and Israel," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 42(125), pages 103-131. [Downloadable!]
  2. Luis-Felipe Zanna & Marco Airaudo, 2005. "Learning about which measure of inflation to target," Computing in Economics and Finance 2005 176, Society for Computational Economics. [Downloadable!]
  3. Vittorio Corbo & Klaus Schmidt-Hebbel, 2002. "Inflation Targeting in Latin America," Documentos de Trabajo 230, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
    Other versions:
  4. Carlos A. Ibarra, 2004. "The Interest Rate-Exchange Rate Link in the Mexican Float," Economia Mexicana NUEVA EPOCA, , vol. 0(1), pages 5-28, January-J. [Downloadable!]
  5. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Muñoz , Jorge & Recabal, Claudio & Acuña, Andrés, 2007. "La política monetaria y su impacto sobre los retornos reales del mercado bursátil chileno
    [Monetary Policy and its impact over the Chilean stock market's real returns]    ," MPRA Paper 14392, University Library of Munich, Germany. [Downloadable!]
  7. Marco Airaudo & Luis-Felipe Zanna, 2005. "Interest rate rules, endogenous cycles, and chaotic dynamics in open economies," International Finance Discussion Papers 849, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  8. Marco Airaudo & Luis-Felipe Zanna, 2004. "Endogenous Fluctuations in Open Economies: The Perils of Taylor Rules Revisited," Money Macro and Finance (MMF) Research Group Conference 2004 6, Money Macro and Finance Research Group. [Downloadable!]
    Other versions:
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