Guatemala had a decade of augmented exchange rate fixing followed by many years of varying and unsuccessful exchange rate arrangements, with gradual development of financial markets and institutions eventually paving the way for successful loose inflation targeting.

Years Targets and attainment Classification
1974-84 exchange rate fixed to USD within narrow margins; monetary policy instruments include reserve requirements, capital/asset requirements, interest rate ceilings, rediscount limits and lending ceilings, but monetary control poor, affected by fiscal deficits and surges in private sector credit, monetary growth very variable; 1983-4 stabilisation programme, but major slippages; guerilla warfare from opposition, brutal repression by government, throughout augmented exchange rate fix AERF
1985-2009 3-tier forex market from late 1984, official rate unchanged versus USD, other two markets more flexible, but imbalances between these markets reinforce effective depreciation and weaken central bank’s balance sheet; 1985 limited moves to liberalise interest rates; 1986 renewed stabilisation effort with reorganisation of forex markets, fiscal-monetary tightening, new role for OMOs, price liberalisation; 1988 exchange rates unified with new depreciated peg to USD; 1989 exchange rate floated (and depreciated), interest rate liberalisation, interbank deposits allowed, role of OMOs widened; 1990 after varying arrangements exchange rate becomes heavily managed; 1990s various financial liberalisation measures; 1994 freer interbank forex market with reduced role for central bank; civil war ended late 1996 with agreement for higher education, social and infrastructure spending financed by higher tax revenues, but latter prove elusive; growing emphasis on price stability, and on OMOs as main monetary instrument; significant forex market intervention from time to time; 2001 USD allowed for use in domestic transactions;  2002 central bank independence improved; 2005-9 inflation targets set by central bank’s Monetary Board (3 out of 8 of whose members are government ministers), overshot 3 years out of 4 then undershot 2009, inflation expectations nearly always above target band; securities markets remain underdeveloped, monetary policy transmission mechanism weak and monetary growth high; forex intervention now constrained by rules loosely structured discretion LSD
2010-17 inflation targets now more or less consistently attained, with expectations better anchored, but transmission still weak and some continued forex intervention loose inflation targeting LIT

Selected IMF references: RED 1975 pp24-5, 30, 70, 72; SR 1975 p9; RED 1976 pp18, 29-30; RED 1979 pp47-9; SR 1983 pp7-8, 10-11; RED 1984 p32; RED 1985 pp33-7; SR 1985 pp8-11, 15, 20; RED 1986 pp33-6, 53; RED 1987 pp1-2, 26-7, 36; RED 1988 pp36, 38; RED 1990 pp2, 20-1, 31; RED 1991 pp17-19, 27; RED 1994 pp14-15, 21; RED 1995 pp15-17, 23, 42-3; SR 1996 p4; RED 1998 pp22-3; SR 1999 pp4, 12, 21; RED 2001 p16; SR 2001 pp10, 12; SR 2002 pp15, 17; SR 2005 pp8, 18; SI 2008 p11; SR 2008 pp5-6, 11-12, 26; SR April 2009 p9; SR November 2009 p18; SR 2012 pp14, 16-17; SR 2013 pp21-2, 25; SR 2014 pp16-17; SR 2016 pp18, 23, 29; SR 2018 pp16-17.

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