Inflation Dynamics and Monetary Policy in Bolivia
IMF Working Papers, December 18, 2015
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Bibliographic details
- Authors: Alejandro D Guerson
- Published: December 18, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513586137.001
Summary
- This paper explores inflation dynamics and monetary policy in Bolivia.
- Bolivia’s monetary policy framework has been effective in stabilizing inflation in recent times.
- High price volatility of key consumer goods subject to recurrent supply shocks, especially food items, has made stabilization challenging.
- Empirical testing indicates that the monetary policy framework has contributed to the stabilization of inflation, with effective transmission through the bank lending channel, while the defacto dollar peg has also played a role.
- Looking ahead, the current framework will be tested by the new commodity price normal and a potentially permanent adjustment in relative prices.
Empirical findings
- Monetary policy framework contributed to the stabilization of inflation.
- Effective transmission occurred through the bank lending channel.
- The defacto dollar peg has had a role in inflation outcomes.
- High volatility in prices of key consumer goods (notably food) due to recurrent supply shocks remains a significant factor in inflation dynamics.
Challenges and outlook
- The "new commodity price normal" is identified as a forthcoming test for the existing framework.
- A potentially permanent adjustment in relative prices could challenge current policy arrangements.
- Continued susceptibility to external commodity price shifts and domestic supply shocks.
Policy recommendations and considerations
- Consideration could be given to a more flexible exchange rate policy arrangement.
- Short term interest rates could be used as the main policy instrument under a more flexible exchange rate arrangement.
Publication and metadata
- Author: Alejandro D Guerson
- Date: December 18, 2015
- Pages: 24
- Volume: 2015
- Issue: 266
- Series: Working Paper No. 2015/266
- DOI: https://doi.org/10.5089/9781513586137.001
- Stock No: WPIEA2015266
- ISBN: 9781513586137
- ISSN: 1018-5941
- Subject: Bank credit; Banking; Central banks; Exchange rates; Foreign exchange; Inflation; Monetary policy; Monetary policy instruments; Money; Open market operations; Prices
- Keywords: Bank credit; Bolivia; central bank; central bank flow intervention; central bank intervention; central bank narrative; central bank open market operations instrument; central bank reaction; contractionary central bank response; exchange rate flexibility; Exchange rate peg; Exchange rates; Global; Inflation; inflation expectation; inflation pressure; monetary policy; Monetary policy instruments; monetary policy transmission; nominal exchange rate; open market operation bill; Open market operations; open market operations instrument; price level; reaction to an increase; WP
- Citation preview (Chicago): Alejandro D Guerson. "Inflation Dynamics and Monetary Policy in Bolivia", IMF Working Papers 2015, 266 (2015), accessed 9/17/2026, https://doi.org/10.5089/9781513586137.001
Source: IMF Working Paper "Inflation Dynamics and Monetary Policy in Bolivia" by Alejandro D Guerson; canonical URL: https://www.imf.org/en/publications/wp/issues/2016/12/31/inflation-dynamics-and-monetary-policy-in-bolivia-43472
Content in this bundle
- 1. Financial System Developments