1. Introduction

Monetary instability has been endemic throughout the twentieth century in Latin America. Inflation, the fall of domestic purchasing power, was particularly high in the 1970s and 1980s, when central banks engaged in expansionary monetary policies to finance government expenditures. In addition, currency crashes caused financial crises and inflationary spurs, specifically in the 1990s. Because the threat of inflation increased contractual risks and put a drag on investment and economic growth, episodes of monetary instability motivated the sovereigns, with the power to create and regulate money, to reforms of central bank laws. Price stability has gradually become the raison d’etre of monetary policy. An increasing number of central banks in Latin America have been granted autonomy in the law to allow central banks to pursue monetary policy independent from political intervention.