Country Embarks on Next Phase of Economic Reforms

Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, says the country is now embarking on the next phase of economic reforms, which will ensure that monetary policy delivers low, stable and predictable inflation.

This strategy, referred to as “inflation targeting”, is a monetary policy regime in which a central bank has an explicit target inflation rate for the medium term and informs the public. An inflation-targeting central bank will raise or lower interest rates based on above-target or below-target inflation, respectively.

Speaking at the opening of the two-day XXII Workshop in International Economics and Finance, at the Bank of Jamaica, downtown Kingston, on Monday (March 18), Dr. Clarke pointed out that this “inflation targeting” regime is gradually being incorporated by the Bank of Jamaica (BOJ) “as the cornerstone of monetary policy”.

“Full-fledged inflation targeting will only become a reality when we complete our next phase of central bank reforms or modernisation to make the Central Bank independent and to upgrade its governance framework, putting inflation targeting as the centrepiece of its monetary policy objective,” he said.

Dr. Clarke noted that the country has been able to reach this milestone, having engaged in an “unprecedented period of fiscal consolidation” over the past several years.

“During this period, Jamaica has had the remarkable accomplishment of reducing its public debt by a half of its gross domestic product (GDP) in a very short time, without handout, without bailout or without debt relief from friends, and that’s an achievement that we are very proud of,” he said.

In the meantime, Governor of the Central Bank of Paraguay, Carlos Fernandez Valdovinos, said that given the macroeconomic stability the country now enjoys, the environment is ideal for Jamaica to start adopting an inflation targeting regime.

“This is the right time to start doing all the necessary reforms. It is very bad to try to do the reform during a crisis,” he said.

Mr. Valdovinos presented on the topic ‘Inflation Targeting in an Emerging Market Economy. Why, When, How’, giving an insight into the experiences of Paraguay regarding inflation targeting.

The workshop, which is being hosted by the BOJ, brings together top researchers and policymakers within the Western Hemisphere to discuss recent theoretical and empirical advances in international economics and finance.

Organised by the Universidad Torcuato Di Tella, (UTDT) of Buenos Aires, Argentina, the World Bank, the Inter‐American Development Bank (IDB) and Latin American and Caribbean Economics Association (LACEA), the purpose of the workshop is to gain a better understanding of the macroeconomic problems faced by Latin American countries and to encourage research on those subjects.

Eleven papers on a wide range of economic issues will be presented and discussed, with a major focus on inflation targeting and monetary policy in emerging economies.