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Central Bank Independence and Inflation in Latin America—Through the Lens of History

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  • LUIS I. JÁCOME
  • SAMUEL PIENKNAGURA

Abstract

We study the link between central bank independence and inflation by providing narrative and empirical evidence based on Latin America's historical experience. Using a novel historical data set of central bank independence for 17 Latin American countries, we recount the rocky journey traveled by central banks to achieve independence and price stability. Our empirical analysis finds a strong negative association between central bank independence and inflation over the last 80 years, with improvements in independence resulting in a steady decline in inflation. Results are robust to endogeneity concerns and to using alternative central bank independence indices.

Suggested Citation

  • Luis I. Jácome & Samuel Pienknagura, 2026. "Central Bank Independence and Inflation in Latin America—Through the Lens of History," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 58(1), pages 261-292, February.
    • Handle: RePEc:wly:jmoncb:v:58:y:2026:i:1:p:261-292
    DOI: 10.1111/jmcb.13206
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    2. Davide Romelli, 2024. "Trends in central bank independence: a de-jure perspective," BAFFI CAREFIN Working Papers 24217, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    3. Angelos Athanasopoulos & Donato Masciandaro & Davide Romelli, 2025. "Long run inflation: persistence and central bank independence," BAFFI CAREFIN Working Papers 25237, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    4. Jacho, Domenica & Cruz, Zoe & Carrillo-Maldonado, Paul, 2024. "Effect of terms of trade on the Latin American Labor market," International Economics, Elsevier, vol. 180(C).
    5. Alexandre Tombini & Ana Aguilar & Jon Frost & Christian Upper & Fabrizio Zampolli, 2023. "Lessons from 20 years of central banking in the Americas," BIS Papers chapters, in: Bank for International Settlements (ed.), Central banking in the Americas: Lessons from two decades, volume 127, pages 3-20, Bank for International Settlements.

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