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Measuring Monetary Policy in Open Economies

Author

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  • Diego, Cerdeiro

Abstract

The paper extends Bernanke and Mihov’s (1998) closed-economy strategy for identification of monetary policy shocks to open-economy settings, accounting for the simultaneity between interest-rate and exchange-rate innovations. The methodology allows a separate treatment of two distinct monetary policy shocks, one that operates through open market operations, and another one that takes place through interventions in the foreign exchange market. The results that the identification strategy yields when applied to the data of a small and open economy are free of the empirical anomalies previously found in the literature.

Suggested Citation

  • Diego, Cerdeiro, 2010. "Measuring Monetary Policy in Open Economies," MPRA Paper 21071, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:21071
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    Cited by:

    1. Kishan Abeygunawardana & Chandranath Amarasekara & C. D. Tilakaratne, 2017. "Macroeconomic Effects of Monetary Policy Shocks," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 18(1), pages 21-38, March.
    2. Carrillo Julio A. & Elizondo Rocío, 2015. "How Robust Are SVARs at Measuring Monetary Policy in Small Open Economies?," Working Papers 2015-18, Banco de México.
    3. Jiménez Polanco, Miguel Alejandro & Paredes Encarnación, Evelio & Ramírez de León, Francisco, 2014. "Monetary Policy Effects in Output and Prices: Evidence for the Dominican Republic using a Structural VAR approach," MPRA Paper 75913, University Library of Munich, Germany.

    More about this item

    Keywords

    Identification; Structural Vector Autoregressions; Open economy; Monetary policy shock; Foreign Exchange Intervention; Endogenous monetary policy.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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