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Financial Conditions and Monetary Policy in Uruguay: An MS-VAR Approach

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  • Bucacos, Elizabeth

Abstract

This study analyzes the effects of "financial stress" on the Uruguayan macroeconomy in the 1998Q3-2016Q2 period with the underlying idea that financial shocks propagate differently during "normal times" than during times of "stress." This behavior is captured in a multivariate framework through a Markovswitching vector auto regressive (MS-VAR) model. The evidence found so far supports the idea that financial conditions affect the macroeconomy, as they not only change the private investment long-run average growth rate but also directly modify the behavior of monetary policy.

Suggested Citation

  • Bucacos, Elizabeth, 2018. "Financial Conditions and Monetary Policy in Uruguay: An MS-VAR Approach," IDB Publications (Working Papers) 8275, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:8275
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    References listed on IDEAS

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