Improving the Monetary Policy Frameworks in Central America
IMF Working Papers, October 1, 2011
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Bibliographic details
- Authors: Alejandro Carrion-Menendez, Florencia Frantischek
- Published: October 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463923242.001
Publication metadata
- Title: Improving the Monetary Policy Frameworks in Central America
- Authors: Alejandro Carrion-Menendez, Florencia Frantischek
- Date: October 1, 2011
- Series: Working Paper No. 2011/245
- Issue: 245
- Volume: 2011
- Pages: 38
- DOI: https://doi.org/10.5089/9781463923242.001
- Stock No: WPIEA2011245
- ISBN: 9781463923242
- ISSN: 1018-5941
Executive summary and central findings
- 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 monetary policy frameworks.
- Examines the experiences of IT countries: Chile, Peru, and Uruguay, to distill lessons for CADR.
- Constructs an index to measure the relative strength of the monetary policy framework of CADR countries.
Lessons and comparative analysis (Chile, Peru, Uruguay)
- The paper uses the experiences of Chile, Peru, and Uruguay as case studies to extract lessons relevant for CADR.
- Key themes from these IT country experiences include institutional design, policy implementation, and the role of transparency and accountability in achieving price stability.
Analytical approach and tools
- Literature review of reforms necessary to strengthen monetary policy frameworks.
- Case study analysis of IT adopters: Chile, Peru, Uruguay.
- Construction of an index measuring the relative strength of monetary policy frameworks across CADR countries.
Policy implications and recommendations
- Strengthen central bank frameworks to enhance the effectiveness of monetary policy in CADR.
- Consider institutional reforms and practical measures aligned with inflation targeting practices as appropriate for country-specific contexts.
- Use a diagnostic index to identify relative strengths and weaknesses across CADR monetary policy frameworks to prioritize reforms.
Subjects and keywords covered
- Subjects: 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
Source: Alejandro Carrion-Menendez and Florencia Frantischek, "Improving the Monetary Policy Frameworks in Central America", IMF Working Papers 2011, 245 (2011), October 1, 2011.