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The study shows that in Latin America, between 2002 and 2023, increases in government spending—especially during the pandemic—raised inflation, with stronger effects in countries with lower fiscal credibility and shorter-maturity debt. Unlike in OECD economies, this inflationary impact persists outside the COVID-19 period, highlighting structural vulnerabilities in the region.
The post-pandemic resurgence of inflation has renewed attention on inflation persistence and the role of central banks in maintaining credibility. While conventional explanations emphasize fiscal discipline, exchange rate regimes, or inflation targeting, these factors do not fully explain why some countries return rapidly to price stability while others experience prolonged inflationary episodes.
The rise of digitalization has transformed financial systems through the adoption of instant payment systems (IPS), which enable real-time fund transfers and promote efficiency and financial inclusion. In Latin America and the Caribbean, the development of these systems varies across countries due to regulatory and technological challenges. To strengthen them, FLAR promotes cooperation among central banks and has developed a regional technical guide outlining key challenges, opportunities, and strategic guidelines to foster greater interoperability and financial integration in the region.