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Efectos de la Nominalización de la Política Monetaria en Chile

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  • Rodrigo Fuentes
  • Alejandro Jara
  • Klaus Schmidt-Hebbel
  • Matías Tapia
  • Erika Arraño

Abstract

The Central Bank of Chile replaced its monetary policy instrument in August 2001, shifting from a monetary policy rate (MPR) linked to an indexed unit of account (UF, defined by the lagged CPI) to a nominal MPR denominated in pesos. This policy change was complemented with a significant change in the Central Bank’s liability structure, from short and medium-term indexed debt to nominal peso debt. This paper analyses, both conceptually and empirically, the main effects of MPR nominalization on financial markets and the conduct and effectiveness of monetary policy. As opposed to previous studies on this subject, this paper concludes that the main advantage of nominalization was a widening of monetary policy options, precluding critical situations in the conduct of monetary policy that would have occurred at low MPR levels under the previous scheme of indexed MPRs.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 197.

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Date of creation: Jan 2003
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Handle: RePEc:chb:bcchwp:197

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References

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  1. M. Fase, 2005. "On Economics and Religion," De Economist, Springer, vol. 153(1), pages 85-106, December.
  2. Buiter, Willem H & Panigirtzoglou, Nikolaos, 1999. "Liquidity Traps: How to Avoid Them and How to Escape Them," CEPR Discussion Papers 2203, C.E.P.R. Discussion Papers.
  3. William Poole, 1970. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Staff Studies 57, Board of Governors of the Federal Reserve System (U.S.).
  4. Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2006. "Does Inflation Targeting Make a Difference?," Working Papers 2006/13, Czech National Bank, Research Department.
  5. Norman Loayza & Klaus Schmidt-Hebbel, 2002. "Monetary Policy Functions and Transmission Mechanisms: An Overview," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.), Monetary Policy: Rules and Transmission Mechanisms, edition 1, volume 4, chapter 1, pages 001-020 Central Bank of Chile.
  6. Friedman, Milton, 1970. "A Theoretical Framework for Monetary Analysis," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 193-238, March-Apr.
  7. Oscar Landerretche & Fernando Lefort & Rodrigo O. Valdés, 2002. "Causes and Consequences of Indexation: A Review of the Literature," Central Banking, Analysis, and Economic Policies Book Series, in: Fernando Lefort & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Serie (ed.), Indexation, Inflation and Monetary Policy, edition 1, volume 2, chapter 2, pages 019-064 Central Bank of Chile.
  8. Schmidt-Hebbel, Klaus & Tapia, Matias, 2002. "Inflation targeting in Chile," The North American Journal of Economics and Finance, Elsevier, vol. 13(2), pages 125-146, August.
  9. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
  10. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  11. Juan Andrés Fontaine, 2002. "Consecuencias de la Nominalización de la Política Monetaria," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 39(117), pages 253-275.
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Citations

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Cited by:
  1. R. Fuentes S. & A. Jara R. & K. Schmidt-Hebbel D. & M. Tapia G., 2003. "Monetary Policy Nominalization in Chile: an Evaluation," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 6(2), pages 5-35, August.
  2. Juan Pablo Medina & Anella Munro & Claudio Soto, 2007. "What Drives the Current Account in Commodity Exporting Countries? The Cases of Chile and New Zealand," Working Papers Central Bank of Chile 446, Central Bank of Chile.
  3. Juan Pablo Medina & Claudio Soto, 2005. "Oil Shocks and Monetary Policy in an Estimated DSGE Model for a Small Open Economy," Working Papers Central Bank of Chile 353, Central Bank of Chile.
  4. Luis Antonio Ahumada & Nicola Cetorelli, 2004. "The Effect of Cross-industry Ownership on Pricing: Evidence of Common Ownership between Banks and Pension Funds in Chile," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Antonio Ahumada & J. Rodrigo Fuentes & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking Market Structure and Monetary Policy, edition 1, volume 7, chapter 10, pages 293-314 Central Bank of Chile.
  5. Rodrigo Valdés P., 2007. "Policy Responses to Sudden Stops in Capital Flows: The Case Of Chile In 1998," Working Papers Central Bank of Chile 430, Central Bank of Chile.
  6. Fernando Aportela & Francisco Gallego & Pablo García, 2003. "Reserves Over the Transitions to Floating and to Inflation Targeting: Lessons From the Developed World," Working Papers Central Bank of Chile 211, Central Bank of Chile.
  7. Luis Antonio Ahumada & Nicola Cetorelli, 2003. "The Effect of Cross-Industry Ownership on Pricing: Evidence from Bank-Pension Fund Common Ownership in Chile," Working Papers Central Bank of Chile 230, Central Bank of Chile.
  8. José De Gregorio & Andrea Tokman & Rodrigo Valdés, 2005. "Tipo de Cambio Flexible con Metas de Inflación en Chile: Experiencia y Temas de Interés," Economic Policy Papers Central Bank of Chile 14, Central Bank of Chile.

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