Uruguay: A Story of Inflation Stabilization and De-dollarization in Three (?) Steps

Gerardo Licandro ()
Additional contact information
Gerardo Licandro: Central Bank of Uruguay

Ensayos Económicos, 2024, vol. 1, issue 84, 130-140

Abstract: This paper analyzes Uruguay's inflation stabilization process, highlighting historical challenges and lessons learned. For decades, the country faced episodes of high inflation, with failed stabilization attempts based on fixed exchange rate regimes that ended in balance of payments crises and monetized fiscal deficits. The stabilization plan implemented in the 1990s marked a turning point, combining a crawling exchange rate band as a nominal anchor, significant fiscal adjustments, and structural reforms in areas such as social security, the financial system, and the public sector. Uruguay achieved low inflation from 1998 onwards, and while the plan culminated in the 2002 crisis, monetary policy remained firmly committed to avoiding inflationary financing of the fiscal deficit—a key factor in preserving the progress on inflation control. Uruguay's experience underscores the importance of strong fiscal anchors, structural reforms, and prudential regulations to stabilize an economy. However, dollarization persists as an economic and cultural challenge, along with the development of local currency markets.

Keywords: exchange rate bands; exchange rate; dollarization; inflation; monetary policy; stabilization plan; Uruguay (search for similar items in EconPapers)
JEL-codes: E31 E50 E65 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://investigacionesconomicas.bcra.gob.ar/ensay ... article/view/671/559 Spanish version (Versión en Español) (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:bcr:ensayo:v:1:y:2024:i:84:p:130-140

Access Statistics for this article

Ensayos Económicos is currently edited by Germán Feldman

More articles in Ensayos Económicos from Central Bank of Argentina, Economic Research Department Contact information at EDIRC.
Bibliographic data for series maintained by Federico Grillo ().