Reglas de política monetaria para una economía abierta con fricciones financieras: Un enfoque Bayesiano

Monetary policy rules for an open economy with financial frictions: A Bayesian approach

Augusto Aliaga

MPRA Paper from University Library of Munich, Germany

Abstract: This paper evaluates optimal monetary policy in a new Keynesian model for an open economy with financial frictions. In the model, aggregate demand is made up of the weighted average of the short and long-term interest rates. A comprehensive set of monetary policy rules is established, all suitable for small open economies, such as Peru. A domestic inflation forecast based rule and an exchange rate based rule are found to work well. Furthermore, international shocks can affect competitiveness and involve co-movements in domestic interest rates. Finally, the estimates suggest that adding the nominal exchange rate to the monetary rule significantly improves the model fit. Consequently, the estimated parameters indicate that international shocks introduced in this model can replicate key empirical facts observed in the domestic business cycle.

Keywords: Comparación de reglas; Economía abierta; Estimación Bayesiana; Fricciones financieras; Política monetaria óptima (search for similar items in EconPapers)
JEL-codes: C11 E31 E32 E44 E52 E58 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-dge and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:100604

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