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Monetary Policy in Latin America in the 90s

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  • 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.

Suggested Citation

  • Vittorio Corbo, 2000. "Monetary Policy in Latin America in the 90s," Working Papers Central Bank of Chile 78, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:78
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