Asymmetric Monetary and Exchange Rate Policies in Latin America

Emiliano Libman

MPRA Paper from University Library of Munich, Germany

Abstract: During the last decades, the number of countries that adopted more fexible exchange rate regimes, in particular Inflation Targeting, has been increasing steadily. Latin-America was no exception. Some authors have argued that there is a flaw in the way in which the system has been conducted in the region. When inflation falls, the Central Bank is reluctant to cut interest rates, but when inflation increases, the Central Bank is willing to raise interest rates very aggressively, adding an unnecessary bias to monetary and exchange rate policies. This paper analyzes the asymmetry of monetary and exchange rate policies in the five largest Latin-American Inflation Targeting countries, Brazil, Chile, Colombia, Mexico, and Peru. Using different econometric techniques, I find that the Central Banks, with the exception of Chile, suffer from "fear of floating". This is a more pronounced phenomenon for the case of Brazil and Mexico, as the literature has argued.

Keywords: Exchange Rates; Exchange Rate Regimes; Inflation Targeting; Asymmetric Policy Rule; Markov-Switching Models; GMM; STAR Models. (search for similar items in EconPapers)
JEL-codes: E58 F30 F41 F43 (search for similar items in EconPapers)
Date: 2017-04-30
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/78864/1/MPRA_paper_78864.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:78864

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().