IDENTIFYING THE EFFECTS OF SIMULTANEOUS MONETARY POLICY SHOCKS

Mauricio Villamizar-Villegas

Contemporary Economic Policy, 2016, vol. 34, issue 2, 268-296

Abstract: type="main" xml:id="coep12111-abs-0001"> Many central banks, particularly in the developing world, aim for exchange rate stability as a macroeconomic goal. However, most are reluctant to relinquish monetary policy autonomy, so they end up operating through both interest rate and foreign exchange interventions. But the use of multiple policy instruments does not necessarily equip monetary authorities with better tools to achieve their targets. On the contrary, their effects can potentially offset each other. Using daily data from the Central Bank of Colombia during the period of 1999–2012, I study the effects of simultaneous policies by first deriving new measures of monetary shocks and then determining their impact on economic activity. The main findings indicate that (a) while interest rate interventions have a significant impact on real and nominal variables, foreign exchange interventions tend to have limited effects; and (b) empirical anomalies, such as the positive relationship between output growth, inflation, and the policy rate are eliminated when properly accounting for the systematic responses of policy. (JEL E43, E52, E58, F31)

Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://hdl.handle.net/10.1111/coep.2016.34.issue-2 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Identifying the Effects of Simultaneous Monetary Policy Shocks. Fear of Floating under Inflation targeting (2014)
Working Paper: Identifying the Effects of Simultaneous Monetary Policy Shocks. Fear of Floating under Inflation targeting (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:coecpo:v:34:y:2016:i:2:p:268-296

Ordering information: This journal article can be ordered from
https://ordering.onl ... 5-7287&ref=1465-7287

Access Statistics for this article

Contemporary Economic Policy is currently edited by Brad R. Humphreys

More articles in Contemporary Economic Policy from Western Economic Association International Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().