Discretion of the Monetary Policy: An Exemplification with Bolivia

Roger Alejandro Banegas Rivero, Marco Alberto Núñez Ramírez and Sacnicté Valdez del Ríoe

Scientific Annals of Economics and Business (continues Analele Stiintifice), 2019, vol. 66, issue 1, 101 - 115

Abstract: In this paper, we evaluate and quantify the role of the discretion of the monetary policy in an open small and open economy (the case of Bolivia). The results suggest that conventional instruments of the Central Bank respond in different ways: interest rates present a sensitive/elastic response to output gap (actual economic cycle) [1.8]; an inelastic mechanism to inflation [0.5]. On the other hand, open market operations in the Central Bank responds elastically to inflation [1.2] and insensible to the output gap. These results are robust to alternative specification utilizing the Generalized Method of moments (GMM), for the quarterly period from 2000(T1)-2015(T4). JEL Codes - C36; E31; E32; E43; E52; E58

Keywords: monetary policy; inflation; output gap; open market operations; elasticity; generalized moments (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:aic:saebjn:v:66:y:2019:i:1:p:101-115:n:130

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