Date Added: May 2011
Evidence suggests that a suitable development strategy for Latin America presupposes growth-oriented macroeconomic policies. In this regard, monetary policy is central to an integrated development policy framework to foster a virtuous circle of increased investment, rising productivity, job creation and expanding consumption. Investment creates both income for workers as well as profits for business. As wage growth feeds into consumption, company profits can be re-invested to sustain investment in the knowledge that the additional capacity will be matched by expanding markets, thereby enabling a virtuous circle of domestic demand-led growth. Growth-oriented monetary policy needs to be complemented by a competitive exchange rate that avoids a deficit on the current account.