Inflation Targeting: The Latin American Experience

Corbo Vittorio and Klaus Schmidt-Hebbel

in Latin American Macroeconomic Reforms

Published by University of Chicago Press

Published in print July 2003 | ISBN: 9780226302676
Published online February 2013 | e-ISBN: 9780226302683 | DOI:
Inflation Targeting: The Latin American Experience

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Stabilization has been achieved under different monetary and exchange regimes in Latin America, ranging from dollarization to inflation targeting (IT) under floating exchange rates. This chapter assesses the implementation and results of inflation targeting in Latin America from a broad perspective. Section 1.2 reviews the issues considered in the choice of exchange rate regimes and monetary frameworks. Section 1.3 documents the evolution of exchange rate and monetary regimes in Latin America during the last two decades. Section 1.4 describes the Latin American and world samples of inflation targeters, and compares their performance to that of non-inflation targeters, focusing on their success in meeting inflation targets, their output sacrifice in achieving low inflation, and their output volatility. Section 1.5 looks at how monetary policy is carried out in five inflation-targeting countries in the region (Brazil, Chile, Colombia, Mexico, and Peru), with reference to the design of IT in the world sample of inflation targeters. Section 1.6 focuses on the longest inflation-targeting experience in the region (the 1991–2000 case of Chile), evaluating how IT has affected inflation expectations and hence the effectiveness of monetary policy, using a battery of alternative model estimations and simulations. The main conclusions are provided in Section 1.7. A commentary is also included at the end of the chapter.

Keywords: Latin America; stabilization; monetary policy; exchange rates; Brazil; Chile; Colombia; Mexico; Peru

Chapter.  20560 words.  Illustrated.

Subjects: Economic Development and Growth

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