Monetary policy rules for Chile and Peru: evidence of instability in the parameters

This paper examines the stability of basic monetary rules for Chile and Peru by estimating parameters using the Kalman Filter, in the context of the work by Clarida et al. (2000), for the period from January 1996 to August 2006. The results show that the response of both central banks to the inflation target is similar. The downward trend observed in the parameter is interpreted as the result of the gain in credibility stemming from the relative success of the respective monetary authorities in meeting their inflation targets. (Audio: Department of Economic Publications)