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The implementation of monetary policy in an emerging economy: the case of Chile

Author

Listed:
  • Christian A. Johnson

    (Universidad Adolfo Ibañez)

  • Rodrigo Vergara

    (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 re-serves. A neural network approach is used to establish the correspond-ing 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," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 20(1), pages 45-62, June.
    • Handle: RePEc:ila:anaeco:v:20:y:2005:i:1:p:45-62
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    More about this item

    Keywords

    Monetary Policy; Neural Network;

    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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