Discretion of the Monetary Policy: An Exemplification with Bolivia

Rivero Roger Alejandro Banegas (), Ramírez Marco Alberto Núñez () and Ríoe Sacnicté Valdez Del ()
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Rivero Roger Alejandro Banegas: Department of Economics, Gabriel Rene Moreno Autonomous University, Plurinational State of Bolivia
Ramírez Marco Alberto Núñez: Sonora Institute of Technology, Mexico
Ríoe Sacnicté Valdez Del: Sonora Institute of Technology, Mexico

Scientific Annals of Economics and Business, 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).

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:vrs:aicuec:v:66:y:2019:i:1:p:101-115:n:6

DOI: 10.2478/saeb-2019-0006

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