European Parliament Library

Inflation Dynamics and Monetary Policy in Bolivia, Alejandro Guerson

This paper explores inflation dynamics and monetary policy in Bolivia. Bolivia’s monetary policy framework has been effective in stabilizing inflation in recent times. This has been a challenging task given high price volatility of key consumer goods subject to recurrent supply shocks, especially food items. 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. Against this background, consideration could be given to a more flexible exchange rate policy arrangement, with short term interest rates as the main policy instrument
Table Of Contents
Cover -- Contents -- I. Introduction and Background -- II. Empirical Strategy -- III. Monetary Policy Power -- IV. Monetary Policy Reaction Function -- V. Monetary Policy Transmission and Impact -- VI. Conclusions and Challenges Ahead -- Figures -- 1. Financial System Developments -- 2. Determinants of Consumer Price Variability -- 3. Central Bank Reaction to an Increase in Consumer Prices -- 4. Central Bank Reaction to an Increase in Core Prices -- 5. Central Bank Reaction to an Increase in Food Prices -- 6. Central Bank Reaction to an Increase in Economic Activity -- 7. Increase in the Stock of Central Bank's Open Market Operation Bills -- 8. Increase in the Interest Rate on Central Bank's 91-day Bills -- 9. Depreciation of the Central Bank Exchange Rate -- Appendix -- I. Model Diagnostic Tests -- References
Literary Form
non fiction
Physical Description
1 online resource (25 pages)
Specific Material Designation
Form Of Item

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