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Monetary policy surprises on the banking sector: The role of the information and pure monetary shocks

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  • Beltrán, Felipe
  • Coble, David

Abstract

This paper analyzes how monetary policy surprises in Chile affects the real and financial sector separating between a pure monetary policy shock and an information shock. Using inter-day movements of futures of interest rate in the banking system, we identify an information shock when labor data is released and a pure monetary policy shock when the central bank reveals their interest rate decision, and their effects are quantified through an external vector autoregression model. Our results suggest that a pure monetary policy shock produce an appreciation of nominal exchange rate, and contractionary effects on the economy. However, an information shock does not necessarily produce adverse effects. This paper contribute to the literature in two dimensions: studying the effect of the main driver behind the central bank announcements, and their transmission to the banking sector and consequently to the real and monetary sector.

Suggested Citation

  • Beltrán, Felipe & Coble, David, 2024. "Monetary policy surprises on the banking sector: The role of the information and pure monetary shocks," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 5(3).
    • Handle: RePEc:eee:lajcba:v:5:y:2024:i:3:s2666143824000097
    DOI: 10.1016/j.latcb.2024.100127
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    Keywords

    External VAR; Monetary policy shocks; Information shocks; Banking sector;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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