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Bolivianization and Effectiveness of the Monetary Policy

Author

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  • Osmar Bolivar

    (Ministerio de Economía y Finanzas Públicas)

Abstract

This research paper examines whether the expansion of the degree of bolivianization of the financial system has implications in terms of a greater effectiveness of the monetary policy. In this regard, an estimation is made of the function associated to the liquidity of the financial system, as the operational objective of the Central Bank of Bolivia’s monetary policy. The explanatory variables considered are the interactions between the instruments of the monetary policy, which are the Open Market Operations and the monetary regulation rate, with bolivianization of the financial system. The incorporation of these interaction variables approximates the variable effects of each instrument on liquidity control of the financial system for each specific value of the bolivianization in the period covered by the analysis. In addition, a Structural VAR is estimated which interrelates bolivianization and the variables making up the instruments, transmission mechanisms and the target variables of the monetary policy, with the aim of analyzing the implications of the effects of the bolivianization on the monetary policy transmission.

Suggested Citation

  • Osmar Bolivar, 2016. "Bolivianization and Effectiveness of the Monetary Policy," Cuadernos de Investigación Económica Boliviana, Ministerio de Economía y Finanzas Públicas de Bolivia, vol. 1(2), pages 1-40, July.
    • Handle: RePEc:efp:journl:v:1:y:2015:i:2:p:1-40
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    More about this item

    Keywords

    Bolivianization; Monetary Policy;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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