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The Impact of Monetary Policy on the Bilateral Exchange Rate: Chile Versus the United States

Jeromin Zettelmeyer ()

Journal Economía Chilena (The Chilean Economy), 2003, vol. 6, issue 2, 29-43

Abstract: This paper examines the reaction of the bilateral Ch$/US$ exchange rate to monetary policy actions in Chile and the United States. The approach is to regress the variation in the exchange rate following a policy announcement on variations in market interest rates in response to the same announcement. U.S. monetary policy actions that raise the three-month Treasury bill rate by 1 percentage point lead to depreciations of the Chilean peso by about 1.5 to 2 percent. The exchange rate also reacts to monetary policy actions in Chile, but the response appears to be smaller, and cannot be estimated with much precision on the available sample.

Date: 2003
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Journal Economía Chilena (The Chilean Economy) is currently edited by Álvaro Aguirre, Sofía Bauducco and Andrés Fernández

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