A history of the institutional reform of monetary policy in Latin America, with lessons for today
After years of macroeconomic instability, central bank independence (CBI) is playing a pivotal role in achieving low inflation worldwide. But in some nations—including Brazil, Colombia, Hungary, India, Mexico, Türkiye, and the United States—central banks have been blamed for focusing only on fighting inflation at the expense of economic growth.
Central Bank Independence and Inflation argues that countries must continue supporting the independence of central banks to keep inflation in check. and, hence, promote long run economic growth Jácome analyzes the evolution of CBI in Latin America from its creation in the 1920s to the present day. He warns against requiring central banks to print money to finance fiscal deficits, because it hinders economic growth. He creates a database of central bank independence to track its evolution and provides empirical evidence of a negative correlation with inflation.
Deeply grounded in history, Central Bank Independence and Inflation warns against the consequences of weakening this institutional arrangement. It is the first book to provide a historical account of Latin America's CBI and will be a valuable resource for those interested in monetary policy.
Reviews
"Luis Jácome's experience as an Ecuadorian economist and an IMF technocrat has made him a passionate supporter of central bank independence (CBI). He uses his detailed knowledge of all of Latin America to expound the history, successes, and sometime failures of CBI in these countries. Reading in this excellent book of the experience and lessons generated within Latin America will benefit everyone concerned with monetary economics, wherever they may live."—Charles Goodhart, CBE, FBA, emeritus professor of banking and finance, Financial Markets Group, London School of Economics
"Given its fortunes and misfortunes, the history of Latin American central banking offers rich and essential lessons that are also applicable to North America, Europe, and, indeed, to the rest of the world. By distilling these lessons, so many of them very painfully learned, Luis Jácome makes a masterful and invaluable contribution. For the new generation of central bankers, policymakers, and citizens—indeed, for anyone interested in promoting good practices in central banking—this is a must read."—Agustin Carstens, former general manager, Bank for International Settlements
"Jácome's book is a commendable exploration of how central bank independence, or the lack thereof, has emerged as a pivotal institutional factor in Latin America, shaping both macroeconomic stability and instability over the past century. Essential reading for economic policymakers and political leaders alike."—Rodrigo Valdés, Western Hemisphere department director, IMF
"In the last four decades central bank independence assumed a progressively crucial role in shaping the evolution of monetary policy economics. This fascinating book explains why, how, and to what effects central bank independence can influence the monetary policy story in Latin American countries. The book targets primarily researchers, academics, and professionals, but also university students in economics, political economy, and finance who are studying macroeconomics, particularly if they focus on emerging and developing countries."—Donato Masciandaro, professor of economics and Chair in Economics of Financial Regulation, Bocconi University
"As debates on central bank independence intensify worldwide, this rigorous and timely analysis of Latin America's experience offers valuable insights for policymakers and scholars concerned with central bank autonomy across the globe."—José Darío Uribe, former governor, Banco de la República, Colombia, 2005–17
About the Author
Luis I. Jácome, PhD, is an adjunct professor at the Walsh School of Foreign Service of Georgetown University and an international consultant on central banking policies. He was previously governor of the Central Bank of Ecuador and is co-author of Challenges for Central Banking: Perspectives from Latin America (2016).
