Jamaica focusing on “Inflation-targeting”

Dr. Nigel Clarke, Finance Minister of Jamaica

Jamaica Finance Minister Dr. Nigel Clarke says the country is entering a new phase of its economic reform programme with the aim of ensuring that monetary policies deliver low, stable and predictable inflation.

“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.

Speaking at the opening of the two-day XXII Workshop in International Economics and Finance, at the Bank of Jamaica, downtown Kingston, on Monday Clarke told participants the “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 modernization to make the Central Bank independent and to upgrade its governance framework, putting inflation targeting as the centerpiece of its monetary policy objective,” he said.

The Finance Minister 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.

Valdovinos presented on the topic “Inflation Targeting in an Emerging Market Economy – Why, When, How” during which he spoke of the experiences of Paraguay regarding inflation targeting.

The workshop, 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.

The workshop is discussing eleven papers on a range of economic issues, with a major focus on inflation targeting and monetary policy in emerging economies.