The Impact of Monetary Policyon the Bilateral Exchange Rate: Chile Versus the United States
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Summary:
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.
Series:
Working Paper No. 2003/071
Subject:
Central bank policy rate Deposit rates Exchange rate policy Exchange rates Financial services Foreign exchange Market interest rates
English
Publication Date:
April 1, 2003
ISBN/ISSN:
9781451849264/1018-5941
Stock No:
WPIEA0712003
Pages:
23
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