Monetary Policy and Macroeconomic Stabilization in Latin America

Latin America is a very important region of the globe, which has been buffeted by successive waves of economic instability within the last decades. These waves have caused several episodes of hyperinflation or near hyperinflation, and several currency and financial crises, which, in certain moments, have even spilled over and affected other emerging markets. This has resulted in huge costs in terms of lost potential growth, and, as is inevitable, the markets most affected by this have been the least capable of defending themselves. In a region plagued by still considerable rates of social exclusion, with some of the highest rates of income concentration in the whole globe, the human costs of these crises have been very substantial. Starting in the early 1990s, the slow implementation of reforms, plus the resumption of more sustained growth-to a substantial degree linked to the increase in commodity prices, especially since the early 2000s-seems to have resulted in a more stable situation. Initially, in early reformers like Chile, later in the larger economies of the region, like Brazil and Mexico, a consensus- embraced by both sides of the political spectrum-towards integration in global markets, both in their trade and financial components, floating exchange rates, independent monetary authorities, and sustainable fiscal policies has emerged.

"The book focuses on the recent experience of Latin America economies with designing, announcing, and implementing monetary policies with different internal and external anchors. Given the often dismal track record of monetary stabilization in Latin America, it deals primarily with the conditions of the economies such as their exposure to real exogenous shocks, high dollarization, regulated and segmented labor markets, lack of reputation of past policies and monetary institutions, and turbulences from deep financial and currency crises. Lessons from European monetary integration are taken into consideration as well as regimes between the extremes of full exchange rate flexibility and fixed exchange rates applied in other emerging markets. Finally, the role which regional integration in Latin America can play to reduce the extent of asymmetric shocks is discussed as a companion piece to joint efforts to fight monetary instability. TOC:Reducing Inflation through Inflation Targeting: The Mexican Experience.- How Has NAFTA Affected the Mexican Economy? Review and Evidence.- Argentina: Monetary Policy by Default.- Do Exchange Rates Matter in Inflation Targeting Regimes? Evidence from a VAR Analysis for Poland and Chile.- Argentina and Brazil Risk: A "Eurocentric" Tale.- Macroeconomic Shocks, Inflation, and Latin America`s Labor Market.- Monetary Policy Rules in Emerging Market Economies: Issues and Evidence."

Reducing Inflation through Inflation Targeting: The Mexican Experience.- Comment on Manuel Ramos-Francia and Alberto Torres.- How Has NAFTA Affected the Mexican Economy? Review and Evidence.- Comment on M.A. Kose, G.M. Meredith, and C.M. Towe.- Argentina: Monetary Policy by Default.- Comment on George T. McCandless.- Do Exchange Rates Matter in Inflation Targeting Regimes? Evidence from a VAR Analysis for Poland and Chile.- Comment on Felix Hammermann.- Argentina and Brazil Risk: A "Eurocentric" Tale.- Comment on Jorge Braga de Macedo and Martin Grandes.- Macroeconomic Shocks, Inflation, and Latin America's Labor Market.- Comment on Ana Maria Loboguerrero and Ugo Panizza.- Monetary Policy Rules in Emerging Market Economies: Issues and Evidence.- Comment on M.S. Mohanty and Marc Klau.