Latin America Economic Perspectives: Shifting Gears in an Age of Heightened Expectations

Overheating and inflationary pressures in Latin America are rising, and many financial regulators wonder whether domestic credit is already growing excessively. On the fiscal front, the region is now facing the well-known fact that tightening during an upturn is harder than loosening during a recession. On the monetary side, the simplistic inflation targeting is being replaced by a combination of targets and ad hoc instruments. Financial stability, or bubble prevention, is the most recent addition to new set of targets. In terms of the toolkit, prudential macroeconomic rules have gained status as an instrument to deliver financial stability.
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