Article

Monetary Policy in Latin America: Performance Under Crisis and the Challenges of Exuberance

Pablo García-Silva and Manuel Marfán

in The Oxford Handbook of Latin American Economics

Published in print July 2011 | ISBN: 9780199571048
Published online September 2012 | | DOI: http://dx.doi.org/10.1093/oxfordhb/9780199571048.013.0009

Series: Oxford Handbooks in Economics

 Monetary Policy in Latin America: Performance Under Crisis and the Challenges of Exuberance

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The performance of emerging economies relative to developed ones has been an important issue in the unfolding of the 2008–9 financial turmoil and the Great Recession. In the case of Latin America, in sharp contrast to periods of turbulence in previous decades, this chapter argues that financial and price stability has been preserved, with impacts on growth that have been less dramatic than in the early 1980s, while monetary policy has reacted more flexibly. The chapter discusses a number of aspects that have contributed to this improved performance during the recent crisis, such as initial economic conditions, especially the fiscal and external positions of the economies in the run-up to the crisis; the evolution of monetary/exchange rate regimes, particularly the shift to inflation targeting and flexible exchange-rate regimes; and structural and institutional aspects such as central-bank independence, reduced domestic financial dollarization, and the strength of fiscal institutions.

Keywords: Great Recession; Latin America; price stability; inflation targeting; fiscal institutions; exchange rate

Article.  10097 words. 

Subjects: Economics ; Macroeconomics and Monetary Economics ; International Economics

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