Measuring Monetary Policy in Open Economies

The paper extends Bernanke and Mihov's [6] closed-economy strategy for identification of monetary policy shocks to open-economy settings, accounting for the simultaneity between interest-rate and exchange-rate innovations. The methodology allows a separate treatment of two distinct monetary policy shocks, one that operates through open market operations, and another one that takes place through interventions in the foreign exchange market. Implementation of this strategy to the case of Argentina provides the stylized facts necessary to choose among competing theoretical models of this economy. In addition to studying the effects of monetary policy innovations, the present study sheds light on the endogenous component of monetary policy. In this regard, the paper finds that, notwithstanding the relative stability of the exchange rate and the accumulation of large amounts of international reserves, the central bank in Argentina has been far from absorbing balance of payments shocks in a currency-board fashion. The growing level of international reserves can be rationalized, instead, as the monetary authority's response to terms of trade, supply and domestic currency demand shocks.

Bibliographic Details

Main Author:	Cerdeiro, Diego A.
Format:	Policy Research Working Paper biblioteca
Language:	English
Published:	2010-03-01
Subjects:	ABSOLUTE VALUE, ACCOUNTING, ASSETS, AUTOREGRESSION, BALANCE OF PAYMENTS, BALANCE SHEET, BALANCE-OF-PAYMENTS CRISES, BANK BONDS, BONDS, CAPITAL ACCOUNT, CASH BALANCES, CENTRAL BANK, CENTRAL BANK ASSET, CENTRAL BANKS, CHECKING ACCOUNTS, CHECKS, CLOSED ECONOMY, COMMERCIAL BANK, COMMERCIAL BANKS, COMMODITIES, COMMODITY, COMMODITY PRICE, COMMODITY PRICES, CONSUMPTION EXPENDITURES, COVARIANCE MATRICES, COVARIANCE MATRIX, CREDIBILITY, CURRENCY BOARD, CURRENCY CRISES, CURRENCY DEMAND, CURRENCY SUPPLY, CURRENCY TRANSACTION, CURRENT ACCOUNT, CURRENT ACCOUNT DEFICIT, CURRENT ACCOUNT SHOCK, CURRENT ACCOUNT SHOCKS, CURRENT ACCOUNT SURPLUS, DEPENDENT VARIABLE, DEPOSIT, DEPRECIATION, DEPRECIATION RATE, DISCOUNT RATE, DOLLAR VALUE, DOMESTIC CURRENCIES, DOMESTIC CURRENCY, DOMESTIC FINANCIAL INSTITUTIONS, DOMESTIC INTEREST RATE, DOMESTIC INTEREST RATES, DOMESTIC LIQUIDITY, DOMESTIC PRICES, ECONOMETRICS, ECONOMIC CONDITIONS, ECONOMIC POLICY, ECONOMIC RESEARCH, ECONOMIC THEORY, ENDOGENOUS VARIABLES, EQUATIONS, EQUILIBRIUM CONDITION, EQUILIBRIUM CONDITIONS, ERROR TERMS, EXCESS DEMAND, EXCESS LIQUIDITY, EXCESS SUPPLY, EXCHANGE RATE, EXCHANGE RATE APPRECIATION, EXCHANGE RATE SHOCKS, EXCHANGE RATES, EXCHANGE TRANSACTIONS, EXCHANGE-RATE, EXOGENOUS VARIABLES, EXPORTS, EXTERNAL POSITION, FEDERAL RESERVE, FEDERAL RESERVE BANK, FINANCIAL SYSTEM, FISCAL POLICY, FISCAL SHOCKS, FIXED EXCHANGE RATE, FLEXIBLE EXCHANGE RATES, FOREIGN ASSETS, FOREIGN CURRENCY, FOREIGN DIRECT INVESTORS, FOREIGN EXCHANGE, FOREIGN EXCHANGE MARKET, FOREIGN EXCHANGE MARKET INTERVENTION, FOREIGN EXCHANGE MARKETS, FOREIGN INTEREST, FOREIGN INTEREST RATES, GDP, GDP DEFLATOR, GENERAL EQUILIBRIUM, GENERAL EQUILIBRIUM MODELS, GROSS DOMESTIC PRODUCT, HOLDINGS, IMPORTS, INCOME, INDUSTRIAL COUNTRIES, INFLATION, INFLATION RATE, INSTRUMENT, INTEREST PARITY, INTEREST RATE, INTEREST-RATE, INTERNATIONAL BANK, INTERNATIONAL ECONOMICS, INTERNATIONAL ECONOMIES, INTERNATIONAL RESERVES, INTERPOLATION, LENDERS, LIABILITY, LIQUIDITY, LOCAL CURRENCY, MACROECONOMIC MODELS, MACROECONOMICS, MARKET CONDITIONS, MONETARY AGGREGATES, MONETARY AUTHORITIES, MONETARY AUTHORITY, MONETARY CONDITIONS, MONETARY ECONOMICS, MONETARY POLICIES, MONETARY POLICY, MONETARY TARGET, MONETARY TRANSMISSION, MONEY DEMAND, MONEY SUPPLY, MONIES, NOMINAL INTEREST RATES, OIL PRICE, OPEN ECONOMIES, OPEN ECONOMY, OPEN MARKET, OPEN MARKET OPERATION, OPEN MARKET OPERATIONS, OUTPUT, POLICY ON EXCHANGE RATES, POLITICAL ECONOMY, PORTFOLIO, PORTFOLIOS, PRICE INDEX, RANDOM WALK, RATE OF GROWTH, REAL GROSS DOMESTIC PRODUCT, REAL INTEREST, REAL INTEREST RATE, REJECTION, REPOS, RESPONSE TO SHOCKS, SHORT-TERM INTEREST RATE, SHORT-TERM INTEREST RATES, SLOWDOWN, STOCKS, STRUCTURAL SHOCK, STRUCTURAL SHOCKS, SUPPLY SHOCK, SUPPLY SHOCKS, TIGHT MONETARY POLICY, TOTAL RESERVES, TRADE BALANCE, TRADE DATA, TRADE GROWTH, TRADE SHOCK, TRADE SHOCKS, TRANSMISSION MECHANISM, TREASURY, UNANTICIPATED DEPRECIATION, UNCERTAINTY, VOLATILITY, WORLD INTEREST RATES,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100326084211 http://hdl.handle.net/10986/3739
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