02092cas a2200253 a 4500 AALejournalIMF013129 230101c9999 xx r poo 0 0eng d 5.00 USD 9781475512502 1018-5941 BD-DhAAL BD-DhAAL Magud, Nicolas. To Cut or Not to Cut? : That is the (Central Bank's) Question In Search of the Neutral Interest Rate in Latin America / Nicolas Magud, Evridiki Tsounta. Washington, D.C. : International Monetary Fund, 2012. 1 online resource (48 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper estimates neutral real interest rate (NRIR) ranges for 10 Latin American countries that either have full-fledged inflation targeting regimes in place or have recently adopted them, using an array of methodologies commonly used in the literature. We find that NRIRs have declined in the last decade, with more economically and financially developed economies exhibiting lower NRIR levels. Based on the estimated NRIRs, we assess that the current monetary stance (measured by the interest rate gap) is appropriately neutral in most of the considered economies, in line with closing output gaps. We also observe that the interest rate gap can be a good predictor of future inflation dynamics and economic growth. In addition, looking at the recent experiences in Brazil and Peru, we suggest that macro-prudential policies could affect the monetary stance even in the absence of direct interest rate changes, through affecting the NRIR. Mode of access: Internet Tsounta, Evridiki. IMF Working Papers; Working Paper ; No. 2012/243 Full text available on IMF http://elibrary.imf.org/view/journals/001/2012/243/001.2012.issue-243-en.xml IMF e-Library