Latin American Central Bank Reform: Progress and Challenges

International Monetary Fund

No 2005/114, IMF Working Papers from International Monetary Fund

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 risks for the success of monetary policy in Latin America.

Keywords: WP; accountability requirement; a number of central banks; decision-making horizon; central bank governor; executive branch; financial system; inflation rate; monetary policy committee (search for similar items in EconPapers)
Pages: 43
Date: 2005-06-01
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Citations: View citations in EconPapers (26)

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