Estabilidad de Precios en América Latina:¿Ya LLegamos Allí?

Olivo, Victor (2016): Estabilidad de Precios en América Latina:¿Ya LLegamos Allí?

Abstract

This paper main purpose is to analyze whether Latin America economies as a whole and on an individual basis have achieved price stability, or are moving towards this objective. After a revision of the literature on the quantitative definition of price stability, I adopt the one that has prevailed in most central banks worldwide: an inflation rate of 2% within a range between 1-3%. Comparing observed inflation and a three-year moving average of the inflation rate of Latin American countries with this benchmark, I conclude that the region has attained a low inflation but not price stability. The paper goes on to examine several factors that decrease the benefits and increase the cost of lowering inflation once this has been reduced below 10%. It also evaluates how the monetary policy strategies adopted throughout the region have influenced the achievement of price stability. I conclude that the region should avoid complacency. In a globalized world in which nations compete intensively in international trade and to attract capital flows, the achievement of the price stability objective added to others institutional reforms, could be fundamental.

• Item Type: MPRA Paper
• English Title: Price Stability in Latin America: Are We There Yet?
• Language: Spanish
• Keywords: Keywords: price stability, inflation rate, central banks, monetary policy, interest rate, monetary base.
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies

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