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The quest for price stability in Central America and the Dominican Republic
Jácome, Luis Ignacio (Author), Parrado, Eric (Author)

URLURL - Presentation file, Visit http://www.imf.org/external/pubs/ft/wp/2007/wp0754.pdf This link opens in a new window

Abstract
This paper addresses the question of why inflation has not yet converged to price stability in Central America and the Dominican Republic and is currentlyrelatively high by Latin American standards. It suggests that despitethe institutional strengthening of monetary policy, important flaws remain in most central banks, in particular a lack of a clear policy mandate and little political autonomy, which are adversely affecting the consistency of policy implementation. Empirical analysis reveals that all central banks raise interest rates to curtail inflation but only some of them increase it sufficiently to effectively tackle inflation pressures. It also shows that some central banks care simultaneously about exchange rate stability. The potential policy conflict arising from a dual central bank mandate and the unpredictable policy response is probably undermining markets' confidence in central banks' commitment to price stability, thereby perpetuating an inflation bias.

Language:English
Keywords:Srednja Amerika, Dominikanska republika, monetarna politika, inflacija, cena, centralne banke, Central America, Dominica, monetary policy, inflation, price, central banks
Work type:Not categorized (r6)
Organization:EF - Faculty of Economics
Year:2007
Publisher:International Monetary Fund
Number of pages:34 str.
Place:Washington
UDC:336.74
COBISS.SI-ID:17265382 Link is opened in a new window
Views:578
Downloads:193
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