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Author: Alicia García-Herrero
Publisher:
ISBN:
Category :
Languages : en
Pages : 20
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Book Description
During the past few years, monetary policy communication has become a hot topic in as far as it seems to have become a very relevant way for central banks to guide markets, beyond actual monetary policy decisions. This paper investigates this issue empirically for the case of Chile. More specifically, using data from 2005 to 2014 and a Component GARCH model, we assess whether changes in the communication of the Central Bank of Chile generate particular a permanent or temporary change in the volatility of interest rates, after controlling for changes in monetary policy instruments. Our results show that the volatility in interest rate futures in Chile's swap markets increases following the central bank's communication. However, the impact tends to be temporary instead of permanent and only statistically significant in the pre-crisis period. All in all, our results indicate a lower relevance of Central Bank communication for short term swap markets which may reflect that market participants have learned to anticipate changes in monetary policy communication, especially after the global financial crisis.
Author: Alicia García-Herrero
Publisher:
ISBN:
Category :
Languages : en
Pages : 20
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Book Description
During the past few years, monetary policy communication has become a hot topic in as far as it seems to have become a very relevant way for central banks to guide markets, beyond actual monetary policy decisions. This paper investigates this issue empirically for the case of Chile. More specifically, using data from 2005 to 2014 and a Component GARCH model, we assess whether changes in the communication of the Central Bank of Chile generate particular a permanent or temporary change in the volatility of interest rates, after controlling for changes in monetary policy instruments. Our results show that the volatility in interest rate futures in Chile's swap markets increases following the central bank's communication. However, the impact tends to be temporary instead of permanent and only statistically significant in the pre-crisis period. All in all, our results indicate a lower relevance of Central Bank communication for short term swap markets which may reflect that market participants have learned to anticipate changes in monetary policy communication, especially after the global financial crisis.
Author: International Monetary
Publisher: International Monetary Fund
ISBN: 1616356952
Category : Business & Economics
Languages : en
Pages : 111
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Book Description
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.
Author: Mr.Enrique G. Mendoza
Publisher: International Monetary Fund
ISBN: 1451971664
Category : Business & Economics
Languages : en
Pages : 36
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Book Description
Legal restrictions governing financial transactions in Chile have produced a system in which most financial assets are either 30-day non-indexed assets or 90-day indexed assets. This paper analyzes data on the rates of return of these assets to determine the extent to which efficient arbitrage takes place under conditions of partial financial indexation. The data cannot reject the joint hypothesis that participants in financial markets formulate their expectations rationally and that these markets operate efficiently. The data also shows that the indexed/non-indexed interest spread is an accurate predictor of future changes in inflation. The significant implications of these findings for the conduct of monetary policy are also discussed in some detail.
Author: Mr.Andrea Pescatori
Publisher: International Monetary Fund
ISBN: 1484363108
Category : Business & Economics
Languages : en
Pages : 33
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Book Description
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.
Author: Christina Stahn
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 272
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Book Description
The focus of this study is to identify similarities and differences of monetary policy in Korea, Indonesia, Malaysia, Chile, Argentina, and Mexico following diverging financial liberalization strategies. The evolution of monetary transmission channels, targets and instruments is examined in connection with the timing and sequencing of financial reforms. Money demand functions are analyzed with respect to stability, causality, and structural breaks. It is shown that the gradual (Asian) liberalization strategy affected monetary policy in a different way than the big-bang (Latin American) approach. Constraints on monetary management are imposed by complex monetary transmission channels changing in view of financial sector crises, alterations in exchange rate regimes, and the increasing globalization of financial markets.
Author: International Monetary Fund. Western Hemisphere Dept.
Publisher: International Monetary Fund
ISBN: 1513572903
Category : Business & Economics
Languages : en
Pages : 103
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Book Description
Selected Issues
Author: Mr.Yan Carriere-Swallow
Publisher: International Monetary Fund
ISBN: 148433146X
Category : Business & Economics
Languages : en
Pages : 32
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Book Description
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.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1475510497
Category : Business & Economics
Languages : en
Pages : 48
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Book Description
The Selected Issues paper discusses external shocks and its effects on Chile. The economy of Chile is susceptible to global financial predicaments, external demands, and commodity rates. This paper reports on financial spillovers from 2008–12, its methodologies, and the pressures on bank funding markets. The paper also examines performance of nonfinancial sector during the 2008–09 crisis. The Executive Board sees the document as an analytical description of Chile in the global scene.
Author: Mr.Jeronimo Zettelmeyer
Publisher: International Monetary Fund
ISBN: 1451849265
Category : Business & Economics
Languages : en
Pages : 24
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Book Description
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.
Author: International Monetary
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 28
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Book Description
In September 2020 the CMF requested TA from the IMF in respect of a review of its regulatory regime for money market mutual funds. Between October 2020 and February 2021, organizational and preparatory work was undertaken by the mission team. This assessment relies on the information submitted by the CMF and other parties interviewed. While the mission did not include a review of supervisory case files, the descriptions of the current approach provided by the regulator, the central bank and industry are mutually consistent as between each other.
