Comparative analysis of monetary policy in Latin America: an application of a state-space model to Brazil, Chile and Mexico
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2025-07-22
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Muinhos, Marcelo Kfoury
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This paper analyzes the behavior of the central banks of Brazil, Chile, and Mexico between 2007 and 2024, with a focus on the post-COVID-19 period, marked by a global inflationary shock. We use state-space models to estimate the implicit inflation targets pursued by these monetary authorities. Estimates based on constant natural interest rates throughout the sample are compared with those that allow for time variation. The main findings are: first, the identification of a contractionary stance by Latin American central banks, especially between mid-2021 and 2022. Second, the particular case of Brazil, where monetary policy was tightened at the end of 2024, while its regional peers were cutting interest rates.