Uncovering Central Bank's Monetary Policy Objectives: Going Beyond Fear of Floating

An Evaluation of Monetary Regime Options for Latin America

“…For comparison, Clarida, Galí and Gertler (1997) present baseline estimates suggesting that the G3 central banks have since the 1980s raised (expected) real interest rates when inflation was high and lowered them when output was below equilibrium (Table 9 lines 1 through 4). 16 Table 9 also shows some roughly comparable results from the literature for Chile and Peru, from and Morón and Castro (2000).…”

When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies

“…In the pre-1979 period, however, the Federal Reserve also pursued countercyclical monetary policy (see Clarida, Gertler, and Gali, 1999). For Peru, Moron and Castro (2000) use the change in the monetary base as the dependent variable and add an additional term involving the deviation of the real exchange rate from trend; they find that monetary policy is countercyclical. For Chile, Corbo (2000) finds that monetary policy does not respond to output (i.e., is acyclical).…”

An Evaluation of Monetary Regime Options for Latin America

“…For comparison, Clarida, Galí and Gertler (1997) present baseline estimates suggesting that the G3 central banks have since the 1980s raised (expected) real interest rates when inflation was high and lowered them when output was below equilibrium (Table 9 lines 1 through 4). 16 Table 9 also shows some roughly comparable results from the literature for Chile and Peru, from Corbo (2000) and Morón and Castro (2000).…”

“…Compared to the developed country examples, the time series are short and the monetary policy regimes are changing during the sample, as we noted in the section above specifically for Chile. For Peru, Morón and Castro (2000) argue that during the turmoil of 1998/1999 the authorities were especially conscious to avoid depreciation, and they show econometrically that the revealed aversion of the authorities to exchange rate weakness was especially strong during that period. Nonetheless, their results also show some countercyclical response.…”