Nonlinear effects of monetary policy shocks and real exchange rate in partially dollarized economies: an empirical analysis for Peru
Por Bigio, Saki; Salas, Jorge
August 2006
Idioma: English
Keywords
- dollarization
- monetary policy
- non-linearity
- Smooth Transition VAR
Clasificación JEL:
- C32
- E32
- E52
- E58
Resumen:
We explore whether changes in the stance of monetary policy and the real exchange rate generate non-linear effects on output and inflation in Peru. We estimate a STVAR model and compute the impulse-response functions for shocks of different size and sign, and for different initial levels of the output gap. We find that the response of economic variables to monetary policy shocks is non-linear. In particular, we find that monetary policy affects GDP more strongly during recessions and, conversely, inflation responds aggressively during booms. We also find that the negative effect of depreciations is stronger in recessions, and the pass-through to inflation is higher in booms. Further evidence on other variables is discussed in the paper.