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Monetary Policy Surprises and the Yield Curve in Chile

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Author Info
Mauricio Larraín
Abstract

This paper estimates the impact of a monetary policy shock on the nominal and real yield curve in Chile during the period 2002-2007. Using information from the forward curve to obtain the non anticipated component of the policy action, we find that the effect of a monetary surprise on the nominal yield curve is positive and very significant, while the effect on the real yield curve is positive but numerically lower than the nominal case and not always significant. The response of the yield curves to the anticipated component of the policy change is found to be not significant. We also report that the response of the nominal curve in Chile to a monetary surprise is lower than in the U.S. The results are robust to using information from the Survey of Economic Expectations to obtain an alternative measure of monetary shock.

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File URL: http://www.bcentral.cl/estudios/revista-economia/2007/abr/v10n1abril2007pp37-50.pdf
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Article provided by Central Bank of Chile in its journal Economía Chilena.

Volume (Year): 10 (2007)
Issue (Month): 1 (April)
Pages: 37-50
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Handle: RePEc:chb:bcchec:v:10:y:2007:i:1:p:37-50

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  1. Cook, Timothy & Hahn, Thomas, 1989. "The effect of changes in the federal funds rate target on market interest rates in the 1970s," Journal of Monetary Economics, Elsevier, vol. 24(3), pages 331-351, November. [Downloadable!] (restricted)
  2. Refet Gurkaynak & Brian Sack & Eric Swanson, 2005. "Do Actions Speak Louder than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," Macroeconomics 0504013, EconWPA. [Downloadable!]
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  3. Stock, James H. & Watson, Mark W., 1999. "Business cycle fluctuations in us macroeconomic time series," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 1, pages 3-64 Elsevier. [Downloadable!] (restricted)
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  4. Ellingsen, Tore & Söderström, Ulf, 2004. "Why are Long Rates Sensitive to Monetary Policy?," CEPR Discussion Papers 4360, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Monika Piazzesi, 2002. "The Fed and Interest Rates - A High-Frequency Identification," American Economic Review, American Economic Association, vol. 92(2), pages 90-95, May. [Downloadable!]
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  6. Kuttner, Kenneth N., 2001. "Monetary policy surprises and interest rates: Evidence from the Fed funds futures market," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 523-544, June. [Downloadable!] (restricted)
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  7. Tore Ellingsen & Ulf Soderstrom, 2001. "Monetary Policy and Market Interest Rates," American Economic Review, American Economic Association, vol. 91(5), pages 1594-1607, December. [Downloadable!] (restricted)
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