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Properties of the Monetary Conditions Index

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  • Grande, G.

Abstract

In recent years increasing use has been made in monetary policy analysis of the so-called Monetary Conditions Index (MCI). The index is defined as a linear combination of changes in a short-term real interest rate and in the real effective exchange rate, whose coefficients are equal to the estimated effects of the two financial variables on real aggregate demand or, alternatively, on a price index.

Suggested Citation

  • Grande, G., 1997. "Properties of the Monetary Conditions Index," Papers 324, Banca Italia - Servizio di Studi.
    • Handle: RePEc:fth:banita:324
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    2. Eika, Kari H & Ericsson, Neil R & Nymoen, Ragnar, 1996. "Hazards in Implementing a Monetary Conditions Index," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 765-790, November.
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    11. David Longworth & Brian O´Reilly, 2002. "The Monetary Policy Transmission Mechanism and Policy Rules in Canada," 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 13, pages 357-392, Central Bank of Chile.
    12. Bennett T. McCallum, 1989. "Targets, Indicators, and Instruments of Monetary Policy," NBER Working Papers 3047, National Bureau of Economic Research, Inc.
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    16. Fuhrer, Jeff & Moore, George, 1992. "Monetary policy rules and the indicator properties of asset prices," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 303-336, April.
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    20. Willem H. Buiter & Marcus Miller, 1983. "Real Exchange Rate Overshooting and the Output Cost of Bringing Down Inflation: Some Further Results," NBER Chapters, in: Exchange Rates and International Macroeconomics, pages 317-368, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Andrzej Toroj, 2008. "Estimation of weights for the Monetary Conditions Index in Poland," Working Papers 27, Department of Applied Econometrics, Warsaw School of Economics.
    2. Paolo Chiades & Leonardo Gambacorta, 2004. "The Bernanke and Blinder Model in an Open Economy: The Italian Case," German Economic Review, Verein für Socialpolitik, vol. 5(1), pages 1-34, February.
    3. Peeters, Marga, 1999. "Measuring monetary conditions in Europe: Use and limitations of the monetary conditions index," MPRA Paper 23534, University Library of Munich, Germany.
    4. ?lyas ??klar & Burhan Do?an, 2015. "Monetary Condition Index with Time Varying Weights: An Application to Turkish Data," Business and Economic Research, Macrothink Institute, vol. 5(1), pages 117-132, June.
    5. Wai-Ching Poon, 2008. "Does Credit Channel Matter in the Conduct of Monetary Policy in Singapore?," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(3), pages 40-50, August.

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    More about this item

    Keywords

    MONETARY POLICY ; INDICES;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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