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

Jeromin Zettelmeyer

No 2003/071, IMF Working Papers from International Monetary Fund

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 change in the exchange rate following a policy announcement on changes 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.

Keywords: WP; monetary policy; exchange rate; interest rate; rate; Interest Rates; Exchange Rates; United States interest rate change; interest rate differential; U.S. dollar; monetary policy action; measures to the monetary policy action; US$ exchange rate; treasury bill rate; dollar rate; monetary policy in Chile; interest rate measure; market rate; monetary policy rate; Exchange rate policy; Central bank policy rate; Market interest rates; Deposit rates (search for similar items in EconPapers)
Pages: 23
Date: 2003-04-01
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Citations: View citations in EconPapers (1)

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