IMF Working Papers

Inflation Dynamics and Monetary Policy in Bolivia

By Alejandro D Guerson

December 18, 2015

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Alejandro D Guerson. Inflation Dynamics and Monetary Policy in Bolivia, (USA: International Monetary Fund, 2015) accessed November 21, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Bank credit, Banking, Central banks, Exchange rates, Foreign exchange, Inflation, Monetary policy, Monetary policy instruments, Money, Open market operations, Prices

Keywords: Bank credit, Bolivia, Central bank, Central bank flow intervention, Central bank intervention, Central bank narrative, Central bank open market operations instrument, Central bank reaction, Contractionary central bank response, Exchange rate flexibility, Exchange rate peg, Exchange rates, Global, Inflation, Inflation expectation, Inflation pressure, Monetary policy, Monetary policy instruments, Monetary policy transmission, Nominal exchange rate, Open market operation bill, Open market operations, Open market operations instrument, Price level, Reaction to an increase, WP

Publication Details

  • Pages:

    24

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2015/266

  • Stock No:

    WPIEA2015266

  • ISBN:

    9781513586137

  • ISSN:

    1018-5941

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