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A Semi-Structural General Equilibrium Analysis of Moldova's Monetary Policy Transmission Mechanism

Author

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  • Ion Partachi

    (Academy of Economic Studies, Chisinau, Republic of Moldova)

  • Simion Mija

    (Academy of Economic Studies, Chisinau, Republic of Moldova)

Abstract

The aim of the research is to describe a macro-econometric model for the monetary policy transmission channels, in order to assess the particularities of low income countries, as Republic of Moldova. The general equilibrium model is kept simple, capturing main transmission channels, while the empirical results are generated using Bayesian estimations. The variables are treated as exogenous and the natural logarithm of first-order differences of seasonally adjusted series is used. Data with quarterly periodicity cover the period 1st quarter of 2002 - 2nd quarter of 2014. The objective of the paper is to quantify the effects of the demand and exchange rate shocks to inflation and to assess the properties of the model, by simulating responses to standard shocks. We discover that exchange rate shocks to inflation have a higher magnitude that demands shocks In Moldova, while demand shocks close faster.

Suggested Citation

  • Ion Partachi & Simion Mija, 2015. "A Semi-Structural General Equilibrium Analysis of Moldova's Monetary Policy Transmission Mechanism," Economic Research Guardian, Mutascu Publishing, vol. 5(1), pages 34-47, June.
    • Handle: RePEc:wei:journl:v:5:y:2015:i:1:p:34-47
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    References listed on IDEAS

    as
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    3. Richard H. Clarida & Jordi Gali, 1994. "Sources of real exchange rate fluctuations: how important are nominal shocks?," Proceedings, Federal Reserve Bank of Dallas, issue Apr.
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    5. Meese, R. & Rogoff, K., 1988. "Was It Real? The Exchange Rate-Interest Differential Ralation Over The Modern Floating-Rate Period," Working papers 368, Wisconsin Madison - Social Systems.
    6. Huizinga, John, 1987. "An empirical investigation of the long-run behavior of real exchange rates," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 27(1), pages 149-214, January.
    7. Bennett T. McCallum & Edward Nelson, 2005. "Targeting versus instrument rules for monetary policy," Review, Federal Reserve Bank of St. Louis, vol. 87(Sep), pages 597-612.
    8. Bennett T. McCallum & Edward Nelson, 2005. "Targeting versus instrument rules for monetary policy," Review, Federal Reserve Bank of St. Louis, vol. 87(Sep), pages 597-612.
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    10. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1.
    11. Ion PARTACHI & Simion MIJA, 2013. "Monetary Policy Transmission Mechanism Using Econometric Models," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 61(4), pages 148-157, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    General equilibrium model; Open economy; Calibration; Monetary policy; Moldova;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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