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A historical analysis of central bank independence in Latin America: the Colombian experience, 1923-2008*

Published online by Cambridge University Press:  01 March 2010

Adolfo Meisel
Affiliation:
Centro de Estudios Económicos Regionales. Banco de la República. Calle 33 3 — 123 (Centro). Cartagena de Indias. Colombia. ameisero@banrep.gov.co, jbaronri@banrep.gov.co
Juan D. Barón
Affiliation:
Centro de Estudios Económicos Regionales. Banco de la República. Calle 33 3 — 123 (Centro). Cartagena de Indias. Colombia. ameisero@banrep.gov.co, jbaronri@banrep.gov.co

Abstract

This paper explores the relationship between central bank independence and inflation in Latin America, using the experience of Colombia (1923-2008) as a case study. Since its creation, in 1923, Colombia’s central bank has undergone several reforms that have changed its objectives and degree of independence. Between 1923 and 1951, it was private and independent, with a legal commitment to price stability. In 1962, monetary responsibilities were divided between a government-dominated monetary board, in charge of monetary policies, and the central bank, which carried them out. In the early 1990s, the bank recovered its independence and its focus on price stability. Inflation varied substantially during these subperiods. Our analysis suggests that the central bank independence, combined with a commitment to price stability, renders the best results in terms of price stability.

Resumen

Este documento explora la relación entre la independencia del banco central y los niveles de inflación en Latinoamérica, usando como estudio de caso la experiencia de Colombia (1923-2008). Desde su creación en 1923, la independencia y objetivos del banco central en Colombia han sido modificados substancialmente. Entre 1923 y 1951, el banco central fue privado e independiente, y con objetivo principal la estabilidad de precios. En 1962, la responsabilidad monetaria fue dividida entre la Junta Monetaria, encargada del diseño de la política monetaria, y el banco central, que se encargaba de ejecutarla. A principios de los 1990s, el banco recobró su independencia y su objetivo fue el control de la inflación. Los niveles de inflación fueron diferentes en estos periodos. El análisis sugiere que la combinación entre un banco central independiente y un objetivo de estabilidad de precios produce los mejores resultados en términos de estabilización de precios.

Type
Articles/Artículos
Copyright
Copyright © Instituto Figuerola de Historia y Ciencias Sociales, Universidad Carlos III de Madrid 2010

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