Introduction to Monetary Policy Challenges in Latin America

Abstract

Latin American countries (LACs) are facing a number of severe monetary policy challenges in the aftermath of the Global Financial Crisis and Great Recession, the post-pandemic scenario, and the war in Ukraine. Indeed, following these various crises, regional central banks must tackle an international situation characterized by inflationary pressures, output contraction, external vulnerabilities, tightness in advanced central banks' monetary policies, nominal dollar appreciation, and falling commodity prices (Bank for International Settlements [BIS], 2022; World Economic Outlook, 2022). They also face several risks and, as such, should care about the climate of uncertainty of this unusual "shock-after-shock" global context. The monetary policy challenges faced by central banks in LACs are intrinsically interrelated with the following ten stylized facts that have become even more important nowadays, given the unprecedented circumstances:1. LACs' central banks, international currency hierarchy, and reduced monetary policy space