CENTRAL BANK AND MONETARY POLICY. Mario A. García Lara Vice-President of the Banco de Guatemala. Origin of the Central Banks. Riksbank (Sweden, 1656) and Bank of England (1694) arise as state banks (debt management)
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Mario A. García Lara
Vice-President of the Banco de Guatemala
GROWTH AND DEVELOPMENT
The temporary tank only avoids a crisis temporarily, while the main problem is solved.
If the temporary tank overflows, an economic crisis of great proportion will ocurr
Inflation deficit devaluation
Orientation of the Organic Law (2002)
CREDIBILITY + AUTONOMY = EFFECTIVITY STABILITY
CREDIBILITY + AUTONOMY
CLARITY OF THE FUNDAMENTAL OBJECTIVE
Article 4 establishes that the functions of the institution are exercised privileging the achievement of the mentioned objective
Article 3 establishes that as its fundamental objective the Banco de Guatemala will promote the stability in the general level of prices
Articles 26, 30, and 34 establish that the attributions of the Monetary Board, of the Presidency and the Management are exercised without undermining the achievement of the mentioned objective
Article 13 reaffirms the integration of the Monetary Board, according to article 132 of the Constitution, and article 14 declares that the members must act in function of national interest and of the fulfillment of the fundamental objective of the central bank.
Article 26 reaffirms the constitutional power of the Board to determine the monetary policy, and article 40 delegates the Banco de Guatemala, as an autonomous entity, the capacity to execute said policy through an Execution Committee
Articles 28 and 84 establish overlap in the duration of the charge of President and Vice-president of the Banco de Guatemala, regarding the presidential period of the Executive Organism
Article 20 establishes the causal for which the President, Vice-president and the elected members of the Monetary Board can be removed.
ECONOMIC AND FINANCIAL AUTONOMY
Article 83 foresees making the accumulated cost of monetary, exchange rate and credit policy
Article 71 observes, among others, the prohibition to the central bank to grant credit to the government contained in article 133 of the Political Constitution of the Republic of Guatemala.
Articles 8 and 9 establish that the net deficiencies or excess derived of the execution of the monetary, exchange rate and credit policy will be absorbed by the State
TRANSPARENCY and ACCOUNT RENDITION
Articles 63 and 64 establish that it is obligatory to publish the Board debates and the resolutions that correspond to the determination of the monetary, exchange rate and credit policy
Article 61 establishes the publication of the monetary policy report with an explanation of the operations made to reach the fundamental objective
Article 62 establishes that it is obligatory to report information and general publication of important data associated to the business of the central bank
Article 34 literal i) establishes the publication of the Income and Expense Budget of theBanco de Guatemala
TRANSPARENCY and ACCOUNT RENDITION
Article 11 establishes that the financial statements of the central bank must be made according to the generally accepted norms and principles with international standards adopted by the Monetary Board at the proposal of the Bank Superintendence.
Article 60 establishes that the President of the Banco de Guatemala must appear before the Congress of the Republic in January and July to render accounts on the results of the execution of the monetary, exchange rate and credit policy of the country.
Article 62 refers to the monthly report of the general balance of the Banco de Guatemala, as well as the annual report on its financial statements, and article 12 requires an external audit to the central bank
SUSTAINABLE IN THE L.P.
(health and education)
BETTER USE OF
Economic Policy and Growth:
STABILITY IS INDISPENSABLE FOR ECONOMIC GROWTH
Central Bank Autonomy
Mobility of Capital
Explicit Inflation Goals
Flexible ER with an exchange rule
Legal and Solidity Reform
Full liberty forcapital (Free Negotiation Law)
New Organic Law
Zero Credit to the government (constitu-tional reform)
Liberalization without appropriate regulation
Multiple ER Big devaluation
Absolute loss of discipline
Regulation for exit and entry of capital
Fiscal Dominance: credit to the government