Optimal monetary policy and macroprodential regulation in a DSGE model for Peru
Date
2023-09-01
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Pontificia Universidad Católica del Perú
Abstract
We investigate the optimal transmission, interaction and estimation of monetary policy
and macroprudential regulation in a dynamic open stochastic general equilibrium model
(frictions represented by portfolio adjustment cost) where we compute optimal combinations
of macroeconomic policies that can react in the short term to the business cycle and/or the
nancial cycle. We nd that the optimal response of monetary policy to the international
interest rate implies the use of foreign exchange reserves to reduce the volatility of the real
exchange rate, non-tradable output, tradable in ation and the terms of trade. Therefore, the
accumulation of foreign exchange reserves is optimal over time. Theoretically, the central
bank should use a foreign exchange intervention rule, while the macroprudential regulator
should use a countercyclical capital bu er that reacts to the rate of credit growth. Consequently,
there are welfare gains from coordinating both policies. The model is estimated
using Bayesian techniques for the Peruvian economy and shows that a model with a forward
looking Taylor rule and a foreign exchange intervention rule that reacts strongly to changes
in the real exchange rate best ts the observed sample.
Description
Keywords
Política monetaria--Perú, Macroeconomía--Perú, Ciclos económicos--Perú
Citation
Collections
Endorsement
Review
Supplemented By
Referenced By
Creative Commons license
Except where otherwised noted, this item's license is described as info:eu-repo/semantics/openAccess