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This paper assesses the quality of the CBC’s communication policy by looking at the predictability and effectiveness of monetary policy communications by the Central Bank of Chile (CBC). To do so, we construct indeces of monetary policy surprises for the three major communication channels of the CBC: the release of policy meetings’ statements, minutes, and monetary policy reports (IPoM). We assess monetary policy predictability and efficacy by looking at the size and time-evolution of monetary policy surprises associated with meeting statements and the impact of the above communication channels on asset markets. We find that, in general, the CBC’s has been effective in its forward guidance through its statements and IPoM. Policy actions are quite predictable, especially post the global financia crisis. The response of equity prices and the exchange rate to monetary policy surprises have the right sign but are not robust. We also find an asymmetric response of equity prices to minutes suggesting that market participants extract information on the status of the economy especially when minutes have a loosening effect. Finally, to look at the macroeconomic impact we find that a 100 bps monetary policy tightening shock implies a decline in economic activity (IMACEC) of about 2 pp. after one year, while the response of inflation is more muted.
Book Synopsis Central Bank Communication and Monetary Policy Surprises in Chile by : Mr.Andrea Pescatori
Download or read book Central Bank Communication and Monetary Policy Surprises in Chile written by Mr.Andrea Pescatori and published by International Monetary Fund. This book was released on 2018-07-06 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the quality of the CBC’s communication policy by looking at the predictability and effectiveness of monetary policy communications by the Central Bank of Chile (CBC). To do so, we construct indeces of monetary policy surprises for the three major communication channels of the CBC: the release of policy meetings’ statements, minutes, and monetary policy reports (IPoM). We assess monetary policy predictability and efficacy by looking at the size and time-evolution of monetary policy surprises associated with meeting statements and the impact of the above communication channels on asset markets. We find that, in general, the CBC’s has been effective in its forward guidance through its statements and IPoM. Policy actions are quite predictable, especially post the global financia crisis. The response of equity prices and the exchange rate to monetary policy surprises have the right sign but are not robust. We also find an asymmetric response of equity prices to minutes suggesting that market participants extract information on the status of the economy especially when minutes have a loosening effect. Finally, to look at the macroeconomic impact we find that a 100 bps monetary policy tightening shock implies a decline in economic activity (IMACEC) of about 2 pp. after one year, while the response of inflation is more muted.
Book Synopsis Monetary policy of the Central Bank of Chile by : Banco Central de Chile
Download or read book Monetary policy of the Central Bank of Chile written by Banco Central de Chile and published by . This book was released on 2000 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Monetary Policy Under Uncertainty and Learning by : Klaus Schmidt-Hebbel
Download or read book Monetary Policy Under Uncertainty and Learning written by Klaus Schmidt-Hebbel and published by . This book was released on 2009 with total page 601 pages. Available in PDF, EPUB and Kindle. Book excerpt:
The Central Bank of Chile (CBC) has implemented broadly advanced transparency practices. This reflects the CBC’s strong public commitment to transparency, which is anchored in the law and has been designated by the CBC as a strategic objective to fulfill its mandate. This policy has earned the CBC the broad trust of its stakeholders and has paid significant dividends for the CBC in terms of safeguarding its autonomy and ensuring its policy effectiveness.
Book Synopsis Chile: Central Bank Transparency Code Review by : International Monetary
Download or read book Chile: Central Bank Transparency Code Review written by International Monetary and published by International Monetary Fund. This book was released on 2021-06-16 with total page 108 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Central Bank of Chile (CBC) has implemented broadly advanced transparency practices. This reflects the CBC’s strong public commitment to transparency, which is anchored in the law and has been designated by the CBC as a strategic objective to fulfill its mandate. This policy has earned the CBC the broad trust of its stakeholders and has paid significant dividends for the CBC in terms of safeguarding its autonomy and ensuring its policy effectiveness.
This paper recounts Chile’s experience with capital account policies since the 1990s. We present how two external shocks were confronted under very different macroeconomic and capital account frameworks. We show that during the 1997-98 Asian-LTCM-Russia crisis, a closed capital account and relatively rigid exchange rate severely constrained the monetary policy response to the shock, aggravating the fall in domestic demand. During the 2008-09 crisis, a full-fledged inflation targeting framework allowed the authorities to implement a significant countercyclical response. We argue that domestic stability considerations lay behind the policy regime switch toward capital account liberalization from 1999 onwards.
Book Synopsis Capital Account Policies in Chile Macro-financial considerations along the path to liberalization by : Mr.Yan Carriere-Swallow
Download or read book Capital Account Policies in Chile Macro-financial considerations along the path to liberalization written by Mr.Yan Carriere-Swallow and published by International Monetary Fund. This book was released on 2013-05-14 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper recounts Chile’s experience with capital account policies since the 1990s. We present how two external shocks were confronted under very different macroeconomic and capital account frameworks. We show that during the 1997-98 Asian-LTCM-Russia crisis, a closed capital account and relatively rigid exchange rate severely constrained the monetary policy response to the shock, aggravating the fall in domestic demand. During the 2008-09 crisis, a full-fledged inflation targeting framework allowed the authorities to implement a significant countercyclical response. We argue that domestic stability considerations lay behind the policy regime switch toward capital account liberalization from 1999 onwards.
Book Synopsis Financial Stability, Monetary Policy, and Central Banking by : Rodrigo A. Alfaro
Download or read book Financial Stability, Monetary Policy, and Central Banking written by Rodrigo A. Alfaro and published by . This book was released on 2010 with total page 432 pages. Available in PDF, EPUB and Kindle. Book excerpt:
This paper builds a model of financial sector vulnerability and integrates it into a macroeconomic framework, typically used for monetary policy analysis. The main question to be answered with the integrated model is whether or not the central bank should include explicitly the financial stability indicator in its monetary policy (interest rate) reaction function. It is found in general, that including distance-to-default (dtd) of the banking system in the central bank reaction function reduces both inflation and output volatility. Moreover, the results are robust to different model calibrations: whenever exchange-rate pass-through is higher; financial vulnerability has a larger impact on the exchange rate, as well as on GDP (or the reverse, there is more effect of GDP on bank's equity - i.e., what we call endogeneity), it is more efficient to include dtd in the reaction function.
Book Synopsis Incorporating Financial Sector Risk Into Monetary Policy Models by : Mr.Dale F. Gray
Download or read book Incorporating Financial Sector Risk Into Monetary Policy Models written by Mr.Dale F. Gray and published by International Monetary Fund. This book was released on 2011-09-01 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper builds a model of financial sector vulnerability and integrates it into a macroeconomic framework, typically used for monetary policy analysis. The main question to be answered with the integrated model is whether or not the central bank should include explicitly the financial stability indicator in its monetary policy (interest rate) reaction function. It is found in general, that including distance-to-default (dtd) of the banking system in the central bank reaction function reduces both inflation and output volatility. Moreover, the results are robust to different model calibrations: whenever exchange-rate pass-through is higher; financial vulnerability has a larger impact on the exchange rate, as well as on GDP (or the reverse, there is more effect of GDP on bank's equity - i.e., what we call endogeneity), it is more efficient to include dtd in the reaction function.
The financial system in Chile functions well overall within a sound regulatory framework. It features large and deep financial markets in a sector dominated by conglomerates, six systemic banks, and pension funds. The twin shocks of social unrest in late 2019 and COVID-19 were adeptly managed thanks to massive and well-coordinated supervisory and fiscal policy responses, as well as unprecedented liquidity support from the Central Bank of Chile (BCCh). Banks have remained profitable through the crisis, partially supported by central bank financing and government-guaranteed SME lending. The funded pension system that has been instrumental in market deepening is under threat due in part to a series of withdrawals. Congress has also authorized life annuity liquidations. A major reorganization of the financial regulatory authorities has been finalized, and Basel III will be implemented starting in December 2021.
Book Synopsis Chile: Financial System Stability Assessment by : International Monetary
Download or read book Chile: Financial System Stability Assessment written by International Monetary and published by International Monetary Fund. This book was released on 2021-12-09 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: The financial system in Chile functions well overall within a sound regulatory framework. It features large and deep financial markets in a sector dominated by conglomerates, six systemic banks, and pension funds. The twin shocks of social unrest in late 2019 and COVID-19 were adeptly managed thanks to massive and well-coordinated supervisory and fiscal policy responses, as well as unprecedented liquidity support from the Central Bank of Chile (BCCh). Banks have remained profitable through the crisis, partially supported by central bank financing and government-guaranteed SME lending. The funded pension system that has been instrumental in market deepening is under threat due in part to a series of withdrawals. Congress has also authorized life annuity liquidations. A major reorganization of the financial regulatory authorities has been finalized, and Basel III will be implemented starting in December 2021.
This paper examines the reaction of the bilateral Ch$/US$ exchange rate to monetary policy actions in Chile and the United States. The approach is to regress the change in the exchange rate following a policy announcement on changes in market interest rates in response to the same announcement. U.S. monetary policy actions that raise the three-month treasury bill rate by 1 percentage point lead to depreciations of the Chilean peso by about 1.5 to 2 percent. The exchange rate also reacts to monetary policy actions in Chile, but the response appears to be smaller, and cannot be estimated with much precision on the available sample.
Book Synopsis The Impact of Monetary Policyon the Bilateral Exchange Rate by : Mr.Jeronimo Zettelmeyer
Download or read book The Impact of Monetary Policyon the Bilateral Exchange Rate written by Mr.Jeronimo Zettelmeyer and published by International Monetary Fund. This book was released on 2003-04-01 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the reaction of the bilateral Ch$/US$ exchange rate to monetary policy actions in Chile and the United States. The approach is to regress the change in the exchange rate following a policy announcement on changes in market interest rates in response to the same announcement. U.S. monetary policy actions that raise the three-month treasury bill rate by 1 percentage point lead to depreciations of the Chilean peso by about 1.5 to 2 percent. The exchange rate also reacts to monetary policy actions in Chile, but the response appears to be smaller, and cannot be estimated with much precision on the available sample.
This Technical Assistance report on Chile constitute technical advice provided by the staff of the IMF to the Banco Central de Chile (BCCh) in response to their request for technical assistance. The BCCh is considering broadening access to its services beyond commercial banks and some Financial Market Infrastructures. The mission emphasized the overarching requirement for all central bank counterparts to be adequately regulated and supervised, to mitigate the central bank’s operational, financial, and reputational risks. Recent changes to the banking law facilitate consolidation of the banking supervisor into the nonbank supervisor. This move should facilitate equal treatment across participants and reduce the prospect of regulatory arbitrage. The new architecture should ease, though not eliminate, coordination efforts between BCCh and authorities when it comes to maintaining financial stability. By applying the assessment framework to Chile, the mission recommended some minor broadening of Nonbank Financial Institutions access to BCCh services, while noting that it should have the power to provide liquidity to any nonbank financial sector to contain spillovers that may otherwise threaten financial stability more generally.
Book Synopsis Chile by : International Monetary Fund. Monetary and Capital Markets Department
Download or read book Chile written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2020-05-13 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This Technical Assistance report on Chile constitute technical advice provided by the staff of the IMF to the Banco Central de Chile (BCCh) in response to their request for technical assistance. The BCCh is considering broadening access to its services beyond commercial banks and some Financial Market Infrastructures. The mission emphasized the overarching requirement for all central bank counterparts to be adequately regulated and supervised, to mitigate the central bank’s operational, financial, and reputational risks. Recent changes to the banking law facilitate consolidation of the banking supervisor into the nonbank supervisor. This move should facilitate equal treatment across participants and reduce the prospect of regulatory arbitrage. The new architecture should ease, though not eliminate, coordination efforts between BCCh and authorities when it comes to maintaining financial stability. By applying the assessment framework to Chile, the mission recommended some minor broadening of Nonbank Financial Institutions access to BCCh services, while noting that it should have the power to provide liquidity to any nonbank financial sector to contain spillovers that may otherwise threaten financial stability more generally.
