An alternative to inflation targeting in Latin America: macroeconomic policies focused on employment

Abstract

A fully opened capital account, a pure floating exchange rate, and inflation-targeting monetary policy is the macroeconomic setting currently recommended in Latin America by the International Monetary Fund and the orthodoxy. In this paper, we present an alternative macroeconomic regime proposal focused on growth and employment. A competitive real exchange rate, as an intermediate target, is an essential component of the regime. The paper argues in favor of the proposed policies by showing that they are viable and manageable and also discusses some possible objections from the mainstream or orthodox approach.

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