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The Implementation of Monetary Policy in an Emerging Economy: The Case of Chile

Author

Listed:
  • Christian A Johnson
  • Rodrigo Vergara

    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

Abstract

Central bank authorities base implementation of monetary policy on an analysis of multiple variables known as monetary policy indicators. In a small open economy such as Chile, these indicators may include inflation misalignments, unemployment, GDP growth, money growth, the current account balance, exchange rate volatility and international reserves. A neural network approach is used to establish the corresponding weights considered by the Board of the Central Bank of Chile during the period 1995-2003. GDP growth and the difference between the actual and the target inflation were found to be among the variables of greatest weight in the monetary policy decision-making process of the Central Bank of Chile during this period.

Suggested Citation

  • Christian A Johnson & Rodrigo Vergara, 2005. "The Implementation of Monetary Policy in an Emerging Economy: The Case of Chile," Documentos de Trabajo 291, Instituto de Economia. Pontificia Universidad Católica de Chile..
    • Handle: RePEc:ioe:doctra:291
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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics

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