ABSTRACT
This chapter examines the problems which have arisen while establishing new institutional arrangements, such as a new currency or a policy rule for monetary base creation, in the context of recently implemented disinflationary stabilisation programmes in Latin American countries. It focuses on Argentina’s and Mexico’s experiences with a quasi-currency board and discretionary monetary policy respectively, which will be contraposed to Brazil’s and Chile’s choice of an exchange-rate mechanism that operates within adjustable bands. The chapter assesses the difficulties inherent in Latin American stabilisation programmes. The hyperinflation situation prevailing in several Latin American countries in the late 1970s and in the 1980s, regardless of various attempts to control monetary aggregates, has led to a variety of disinflation stabilisation experiments. Some Latin American countries experienced, as well, currency-board arrangements during the gold standard. The regime of target zones establishes upward and downward limits for exchange-rate fluctuations.
