The conduct of Monetary Policy in Central America and Dominican

The conduct of Monetary Policy in Central
America and Dominican Republic, in an
Increasingly Globalised Environment
República
Dominicana
Guatemala
El Salvador
Honduras
Nicaragua
Co
st
a
Ri
ca
Alfredo Blanco
Executive Secretary CAMC
Barbados, May 10, 2007
Background
Inflation in Central America and Dominican Republic,
Latin America and Advanced Economies
25.0
Central America and Dominican
Republic
20.0
Latin America
Avanced Economies
15.0
6.2%
10.0
4.8%
5.0
2.6%
0.0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2
CARD: Net Current Transfers
Central America and Dominican Republic:
Net Current Transfers -including Remittances(Millions of US $)
16,000
12,000
8,000
4,000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
3
CARD: Capital Inflows
Central America and Dominican Republic:
Capital Inflows. (Millions of US $)
56,000
Average 2000-2006
US $41.3 billions
44,000
32,000
Average 1990-1999
US $20.6 billions
20,000
8,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
4
CARD: Accumulation of Reserves
Central America and Dominican Republic:
Net International Reserves (Millions of US $)
(1998:01 - 2007:02)
16,000
12,000
8,000
4,000
0
1998
1999
2000
2001
2002
2003
2004
Costa Rica
El Salvador
Guatemala
Nicaragua
Rep. Dominicana
CARD
2005
2006
2007
Honduras
5
Monetary Frameworks in CARD
…towards flexibility
Countries
Before 2000
After 2000
El Salvador
Monetary Targeting
Dollarisation (2001)
Nicaragua
Crawling Peg
Crawling Peg (2007?)
Costa Rica
Crawling Peg
Bands (2006)
Honduras
Bands
Bands (2006)
República
Dominicana
Monetary Targeting
Monetary Targeting
(2006)
Guatemala
Monetary Targeting
Towards Inflation
Targeting (2002)
6
The Case of Guatemala, since 2002
¾
¾
¾
¾
New Organic Law of the Central Bank.
Nine Indicative Variables.
Towards Forward Looking Approach.
Inflation Forecasting.
Semi-Structural Model.
Mechanisms of Transmission.
¾ Transparency.
¾ Accountability.
7
BANCO DE GUATEMALA
BOLETÍN DE PRENSA
La Junta Monetaria, en su sesión celebrada el 25 de
abril de 2007, decidió elevar la tasa de interés líder
de la política monetaria en 25 puntos básicos, de
5.25% a 5.50%..... luego de haber conocido el
balance de riesgos de inflación, los resultados del
corrimiento mecánico del Modelo Macroeconómico
semiestructural y la orientación de las variables
indicativas, …………
8
BANCO DE GUATEMALA
BOLETÍN DE PRENSA
…. tomó en consideración que los pronósticos de
inflación presentados por los departamentos técnicos
del Banco de Guatemala, tanto para 2007 como para
2008, se ubicaban por arriba de la meta establecida
para cada uno de esos años, aspecto que, en el
contexto del esquema de metas explícitas de inflación,
aconsejaba restringir la política monetaria.
9
…..However
There are still important challenges to improve
the efficiency in the conduct of Monetary Policy in
an increasingly globalised enviroment.
Large Quasifiscal Deficits.
The structure of foreign exchange markets.
Less developed capital markets.
10
Agenda
The CAMC is working on harmonization of
policies.
Matrix of policies
– Harmonization in legal reserve requirements.
– Harmonization in instruments used in open market
operations.
– Transparency: inflation report and surveys of
inflationary expectations.
A Monetary
discussions.
Union
is
not
yet
under
11
The conduct of Monetary Policy in Central America
and Dominican Republic, in an Increasingly
Globalised Environment
www. secmca.org
ablanco@secmca.org
Barbados, May 10, 2007