IMF Working Papers

Improving the Monetary Policy Frameworks in Central America

ByAlejandro Carrion-Menendez, Florencia Frantischek

October 1, 2011

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Alejandro Carrion-Menendez, and Florencia Frantischek. "Improving the Monetary Policy Frameworks in Central America", IMF Working Papers 2011, 245 (2011), accessed 12/20/2025, https://doi.org/10.5089/9781463923242.001

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Several Central American (CADR) countries with independent monetary policies are strengthening their monetary frameworks and some have implemented or are moving towards inflation targeting (IT) regimes. Strengthening the monetary policy frameworks of CADR is key to improving the effectiveness of monetary policy. The paper reviews the literature on the reforms needed for strengthening the monetary policy frameworks, and examines the experiences of IT countries, Chile, Peru, and Uruguay to help distill lessons for CADR. It also constructs an index to measure the relative strength of the monetary policy framework of CADR countries.

Subject: Banking, Central bank autonomy, Central banks, Exchange rate flexibility, Foreign exchange, Inflation, Monetary policy, Monetary policy frameworks, Price stabilization, Prices

Keywords: benchmark yield curves, CADR country, Central America, Central bank autonomy, central bank governor, central bank instrument independence, central bank of Guatemala, central bank recapitalization plan, Exchange rate flexibility, government inflation-indexed bond, Inflation, inflation targeting, instrument independence, Latin America, monetary policy, Monetary policy frameworks, Price stabilization, recapitalization plan, South America, WP

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