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Is Inflation Targeting Still on Target? The Recent Experience of Latin America
Author(s) -
Céspedes Luis Felipe,
Chang Roberto,
Velasco Andrés
Publication year - 2014
Publication title -
international finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 39
eISSN - 1468-2362
pISSN - 1367-0271
DOI - 10.1111/infi.12047
Subject(s) - latin americans , economics , inflation targeting , exchange rate , monetary policy , inflation (cosmology) , market liquidity , emerging markets , monetary economics , international economics , capital flows , capital market , macroeconomics , finance , political science , market economy , liberalization , physics , theoretical physics , law
This paper reviews the recent experience of a group of Latin American inflation‐targeting (IT) nations. We document repeated and large deviations from the standard IT framework: exchange market interventions have been widespread; the real exchange rate has often become a target of policy; and other non‐conventional policy tools, especially changes in reserve requirements, but occasionally also taxes and restrictions on international capital movements, have come into common use. As in developed nations, during the 2008–2009 crisis, issues of liquidity provision took centre stage. The emerging modified framework of monetary policy is found to have been generally effective during the crisis but raises several important policy questions.