ANALYZING THE IMPACT OF MONETARY POLICY ON FINANCIAL MARKETS IN CHILE

Abstract: 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 s...

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Autores principales:	GARCIA-HERRERO,ALICIA, GIRARDIN,ERIC, GONZALEZ,HERMANN
Lenguaje:	English
Publicado:	ILADES. Universidad Alberto Hurtado. 2017
Materias:	Monetary policy communication interest rates Chile Central Bank
Acceso en línea:	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-88702017000100003
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spelling	oai:scielo:S0718-887020170001000032017-06-21ANALYZING THE IMPACT OF MONETARY POLICY ON FINANCIAL MARKETS IN CHILEGARCIA-HERRERO,ALICIAGIRARDIN,ERICGONZALEZ,HERMANN Monetary policy communication interest rates Chile Central Bank Abstract: 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 generates in 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 reduced relevance of Central Bank’s 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.info:eu-repo/semantics/openAccessILADES. Universidad Alberto Hurtado.Revista de análisis económico v.32 n.1 20172017-04-01text/htmlhttp://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-88702017000100003en10.4067/S0718-88702017000100003
institution	Scielo Chile
collection	Scielo Chile
language	English
topic	Monetary policy communication interest rates Chile Central Bank
spellingShingle	Monetary policy communication interest rates Chile Central Bank GARCIA-HERRERO,ALICIA GIRARDIN,ERIC GONZALEZ,HERMANN ANALYZING THE IMPACT OF MONETARY POLICY ON FINANCIAL MARKETS IN CHILE
description	Abstract: 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 generates in 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 reduced relevance of Central Bank’s 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	GARCIA-HERRERO,ALICIA GIRARDIN,ERIC GONZALEZ,HERMANN
author_facet	GARCIA-HERRERO,ALICIA GIRARDIN,ERIC GONZALEZ,HERMANN
author_sort	GARCIA-HERRERO,ALICIA
title	ANALYZING THE IMPACT OF MONETARY POLICY ON FINANCIAL MARKETS IN CHILE
title_short	ANALYZING THE IMPACT OF MONETARY POLICY ON FINANCIAL MARKETS IN CHILE
title_full	ANALYZING THE IMPACT OF MONETARY POLICY ON FINANCIAL MARKETS IN CHILE
title_fullStr	ANALYZING THE IMPACT OF MONETARY POLICY ON FINANCIAL MARKETS IN CHILE
title_full_unstemmed	ANALYZING THE IMPACT OF MONETARY POLICY ON FINANCIAL MARKETS IN CHILE
title_sort	analyzing the impact of monetary policy on financial markets in chile
publisher	ILADES. Universidad Alberto Hurtado.
publishDate	2017
url	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-88702017000100003
work_keys_str_mv	AT garciaherreroalicia analyzingtheimpactofmonetarypolicyonfinancialmarketsinchile AT girardineric analyzingtheimpactofmonetarypolicyonfinancialmarketsinchile AT gonzalezhermann analyzingtheimpactofmonetarypolicyonfinancialmarketsinchile
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ANALYZING THE IMPACT OF MONETARY POLICY ON FINANCIAL MARKETS IN CHILE

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