OECD Economics Department Working Papers
Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
- Forthcoming titles
- ISSN: 18151973 (online)
- https://doi.org/10.1787/18151973
Monetary Policy and Macroeconomic Stability in Latin America
The Cases of Brazil, Chile, Colombia and Mexico
In 1999, new monetary policy regimes were adopted in Brazil, Chile, Colombia and Mexico, combining
inflation targeting with floating exchange rates. These regime changes have been accompanied by lower
volatility in the monetary stance in Brazil, Colombia and Mexico, despite higher inflation volatility in
Brazil and Colombia. This paper estimates a conventional New Keynesian model for these four countries
and shows that: i) the post-1999 regime has been associated with greater responsiveness by the monetary
authority to changes in expected inflation in Brazil and Chile, while in Colombia and Mexico monetary
policy has become less counter-cyclical, ii) lower interest-rate volatility in the post-1999 period owes more
to a benign economic environment than to a change in the policy setting, and iii) the change in the
monetary regime has not yet resulted in a reduction in output volatility in these countries.
Keywords: inflation target, impulse response function, Colombia, counterfactual analysis, structural model, Brazil, Chile, Mexico
JEL:
C15: Mathematical and Quantitative Methods / Econometric and Statistical Methods and Methodology: General / Statistical Simulation Methods: General;
C22: Mathematical and Quantitative Methods / Single Equation Models; Single Variables / Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes;
E52: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / Monetary Policy;
O52: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies / Economywide Country Studies: Europe
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