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The Rate of Reserve Requirements and Monetary Policy in Uruguay: a DSGE Approach

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  • German Cubas

Abstract

The goal of this paper is analyze the role of reserve requirements in the transmission of the monetary policy in Uruguay. Motivated by recent changes in the banking reserves rules implemented by the Central Bank a DSGE model that includes this feature is developed to understand its effects in the macroeconomic variables. The model is an extended version of the new keynesian business cycle model developed in Cubas (2011). It includes a banking system and a richly modeled monetary policy with inflation targeting with interventions in the foreign exchange market by the central bank. The model is then calibrated to Uruguay and then used to analyze the reaction of the macroeconomic variables to exogenous shocks to productivity, government expenditures, international interest rate, monetary interventions, risk premium, international inflation and price of exports; under different reserve requirement rules. The model predicts minor changes in the response of the variables of interest for the observed changes in the mean rate of reserve requirements in Uruguay in the period 2005-2011.

Suggested Citation

  • German Cubas, 2012. "The Rate of Reserve Requirements and Monetary Policy in Uruguay: a DSGE Approach," Documentos de trabajo 2012011, Banco Central del Uruguay.
  • Handle: RePEc:bku:doctra:2012011
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    File URL: https://www.bcu.gub.uy/Estadisticas-e-Indicadores/Documentos%20de%20Trabajo/11.2012.pdf
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    References listed on IDEAS

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    2. Castillo, Paul & Montoro, Carlos & Tuesta, Vicente, 2009. "A Dynamic Stochastic General Equilibrium Model with Dollarization for the Peruvian Economy," Working Papers 2009-003, Banco Central de Reserva del Perú.
    3. Neumeyer, Pablo A. & Perri, Fabrizio, 2005. "Business cycles in emerging economies: the role of interest rates," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 345-380, March.
    4. German Cubas, 2011. "A Dynamic Stochastic General Equilibrium Model for Policy Analysis in Uruguay," Documentos de trabajo 2011013, Banco Central del Uruguay.
    5. Conrado Brum & Elizabeth Bucacos & Patricia Carballo, 2010. "La demanda de dinero en una economía dolarizada. Una estimación para Uruguay," Documentos de trabajo 2010013, Banco Central del Uruguay.
    6. Guillermo Escudé, 2007. "ARGEM: A DSGE Model with Banks and Monetary Policy Regimes with Two Feedback Rules, Calibrated for Argentina," BCRA Working Paper Series 200721, Central Bank of Argentina, Economic Research Department.
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    Cited by:

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