The Monetary and Financial System

And in the current case of inflation in Latin America is a bit of everything (and we should acknowledge that domestic demand shows strong), but mainly the a inflation is what is causing the most damage. Then, unable to implement an effective monetary policy to control inflation, what can governments do? An alternative policy is being implemented by some countries in the region, among which is Mexico. The policy has decided to pursue the Mexican government is directly attacking the rise in basic food prices but not through price controls and other mechanisms of pressure, which end up causing the opposite effect, but through relief tax and boost supply. Thus, Mexico decided to eliminate tariffs on imports of various foods, like corn, wheat, rice and soybean paste. In this way he attack inflation at source, while protecting the poor.

This measure is complemented by a policy to support farmers to increase production (one bag was established more than U.S. $ 1,900 million to finance the purchase of machinery), elimination of taxes fertilizers and manure, and increased support for poorer families. In relation to this decision Calderon said: “In order to mitigate the effects of this international phenomenon in our country and to avoid affecting those who have less, my government will start from today a series of actions that support the economy of families from rising international food prices. ” I understand that these measures are to highlight as they are likely to have greater effectiveness in containing inflation arising from the outside, while not introduce distortions in the economy. A message of this policy is that it identifies in the promotion of domestic food production, an element to be promoted to reduce dependence on external price volatility. But these may not be the only benefits of such direct measures against the causes. Do you have any additional benefit this type of economic policy actions? In relation to the previous question, I understand the effectiveness that can have these economic policy measures to control inflation, they relieve the task of monetary policy to decide on a benchmark rate lower than otherwise decide, so that economic activity could be seen benefit in this way. And the final cost of policies to promote agricultural production and tariff elimination would reduce the product of a higher level of activity. We will meet again tomorrow, Horacio Horacio Daniel Pozzo Pozzo holds a BA in Economics and Master in Economics, both studies at the Universidad Nacional de La Plata (UNLP) -.

Since 1999 and for three years he worked on planning and financial management in the private sector. He then worked as a researcher for the Center for Financial Stability where he participated in research projects for the World Bank, the Embassy of Great Britain, the IDB, CAF, among other international agencies, specializing in matters of Corporate Governance and Capital Risk. From November 2005 through November 2007 was part of the staff of Foundation Capital economists specializing in issues inflation, monetary policy and the financial system. Currently teaches Macroeconomics II of La Plata (UCALP), serving as acting assistant professor. Author of several articles on monetary and financial system in the literature.

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