Inflation Targeting, Reserves Accumulation, and Exchange Rate Management in Latin America

Roberto Chang

No 4518, Borradores de Economia from Banco de la Republica

Abstract: This paper examines whether central banks in Latin America have implemented conventionalinflation targeting (IT) prescriptions, with a focus on foreign exchange intervention and officialreserves accumulation policies. To this end, the paper reviews the experiences of Brazil, Chile,Colombia, and Peru, and finds significant departures from the dominant theory of IT. Foreignexchange intervention has often been used to prevent excessive financial volatility, bubbles, andpanics. Ongoing patterns of reserves accumulation have been the outcome of an effort to buildwar chests" against speculative attacks and, more recently, of a fight against real exchangeappreciation. Possible justifications of the discrepancies between conventional IT theory andpractice are discussed and generally found unsatisfactory."

Keywords: Inflation Targeting; Exchange Rate Policy; International Reserves. (search for similar items in EconPapers)
JEL-codes: E5 F4 (search for similar items in EconPapers)
Pages: 78
Date: 2008-02-14
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-lam, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Working Paper: Inflation Targeting, Reserves Accumulation, and Exchange Rate Management in Latin America (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000094:004518

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