Measuring the effects of monetary policy through market expectations

With the aim of quantifying the effects of monetary policy in Peru, this study constructs a monetary policy shock indicator based on market expectations derived from surveys and media reports. Since the proposed indicator allows for the quantification of exogenous changes in monetary policy, its dynamic impact on output and prices is evaluated. Using monthly data for the period from 2003 to 2011, the results regarding the magnitude and timing of monetary policy effects are consistent with those reported in the literature using alternative approaches. (Audio: Department of Economic Publications)