ABSTRACT This study sought to identify the objectives of monetary policy in five Latin American countries. The method employed here is based on the "reaction function" approach first used by Reuber for the case of Canada and by Dewald and Johnson for the United States but differs from it in that alternative sets of internally consistent monetary policy objectives are defined a priori, namely, before estimates of the authorities' reaction patterns are obtained empirically.

This paper examines whether central banks in Latin America have implemented conventional inflation targeting (IT) prescriptions, with a focus on foreign exchange intervention and official reserves accumulation policies. To this end, the paper reviews the experiences of Brazil, ...

En América Latina, los Bancos Centrales de Brasil, Chile y México han adoptado medidas en su Política Monetaria para hacer frente a los altos niveles de inflación que afectan no solo a estas economías sino también al mundo en general. Estos países tienen como objetivo lograr la estabilidad de los precios, para lo cual han otorgado autonomía a sus Bancos Centrales desde la década de los 90, conocida como el periodo de la gran moderación. Si bien los países desarrollados han adoptado cambios en sus políticas monetarias después de la crisis del 2008, los países de América Latina han mantenido las mismas medidas implementadas antes de esta crisis, esperando obtener resultados positivos en sus economías. Sin embargo, en la nueva reconfiguración económica, es importante distinguir los posibles efectos que podrían surgir por las constantes altas tasas de interés que establecen los Bancos Centrales de América Latina. Es necesario analizar si estas medidas permitirán recuperar el control sobre los altos niveles inflacionarios o si se requerirá una mayor intervención por parte de la política fiscal para lograr reducir los niveles inflacionarios. En este sentido, resulta crucial evaluar los efectos de la flexibilización cuantitativa que se ha adoptado en los países desarrollados y si puede ser una alternativa para los países de América Latina.

We analyze inflation’s persistence in the 1980-2006 period for the ten largest Latin American economies using univariate time-series techniques. Although the estimated degree of inflation persistence appears to be different across countries, for the region as a whole the persistence seems to be very high. However, the estimated degree of persistence falls in all countries once we permit structural breaks in the mean of inflation. The timing of these breaks coincides with shifts in the monetary policy regimes and is similar across countries. Regardless of the changes in the mean, the degree of persistence appears to be decreasing in the region, even though for some countries persistence does not seem to be changing.

To ensure financial market stabilities, many Latin America countries implemented pure floating and inflation targeting (FIT) policies following the IMF's suggestions. The effectiveness of such policies is under investigation. This paper examines the long-run relationship between the real exchange rates (RERs) and real interest rate(RIR) differentials in major Latin America countries over 1993-2009. It shows there are long-run cointegrations between the RERs and RIR differentials in Argentina, Chile and Columbia, as well as long-run causal relationships in Brazil, Mexico and Venezuela. The results support that the FIT regime has facilitated the regional money market and currencies stabilizations in Latin America. The findings have important implications for policy makers and international investors in emerging markets.