Economics at your fingertips  

Foreign Shocks and Monetary Policy Transmission in Chile

Eric Parrado ()

Journal Economía Chilena (The Chilean Economy), 2001, vol. 4, issue 3, 29-57

Abstract: This paper considers empirical evidence for a small open economy, characterizing and identifying the dynamic effects of foreign and monetary policy shocks on Chilean macroeconomic variables. A structural VAR approach is used with non-recursive contemporaneous restrictions. The analysis provides several interesting results. First, consistent with the predictions of a stochastic rational-expectations model, a domestic monetary contraction generates a temporary reduction of output and monetary aggregates. Second, there is no evidence of price and exchange rate puzzles. Third, the source of Chilean output, price level, and real exchange rate volatility is similar to that identified in industrial countries; monetary policy explains a relatively small fraction of output, price level, and exchange-rate variability. Finally, foreign monetary policy innovations have short-lived effects on domestic interest rates and have no major influence over other Chilean macroeconomic variables. However, risk premium shocks influence significantly both the interest rate and the exchange rate.

Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link) ... v4n3dic200129_57.pdf (application/pdf)

Related works:
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:

Access Statistics for this article

Journal Economía Chilena (The Chilean Economy) is currently edited by Roberto Alvarez, Miguel Fuentes and Claudio Raddatz

More articles in Journal Economía Chilena (The Chilean Economy) from Central Bank of Chile Contact information at EDIRC.
Bibliographic data for series maintained by Claudio Sepulveda ().

Page updated 2020-03-29
Handle: RePEc:chb:bcchec:v:4:y:2001:i:3:p:29-57