TY - JOUR
T1 - Impact of monetary policy shocks in the Peruvian economy over time
AU - Pérez Rojo, Flavio
AU - Rodríguez, Gabriel
N1 - Publisher Copyright:
© 2024 Elsevier B.V.
PY - 2024/12
Y1 - 2024/12
N2 - We investigate the evolution of the impact of monetary policy (MP) shocks in Peru in 1996Q1-2018Q2 using a set of time-varying parameter VAR models with stochastic volatility (TVP-VAR-SV), as proposed by Chan and Eisenstat (2018). The main results are: (i) the volatility of MP shocks falls during the Inflation Targeting (IT) regime; (ii) a contractionary MP shock decreases both GDP growth and inflation within a five quarters time span; (iii) the interest rate reacts faster to aggregate supply shocks than to both aggregate demand shocks and exchange rate shocks; (iv) under the pre-IT regime, MP shocks explain 20%, 10%, and 85% of the uncertainty in GDP growth, inflation, and the interest rate, respectively; and under the IT regime, all these percentages shrink to 1%–2%. The sensitivity analysis confirms the robustness of the main results. In general, the results show that MP has contributed to diminishing macroeconomic volatility in Peru.
AB - We investigate the evolution of the impact of monetary policy (MP) shocks in Peru in 1996Q1-2018Q2 using a set of time-varying parameter VAR models with stochastic volatility (TVP-VAR-SV), as proposed by Chan and Eisenstat (2018). The main results are: (i) the volatility of MP shocks falls during the Inflation Targeting (IT) regime; (ii) a contractionary MP shock decreases both GDP growth and inflation within a five quarters time span; (iii) the interest rate reacts faster to aggregate supply shocks than to both aggregate demand shocks and exchange rate shocks; (iv) under the pre-IT regime, MP shocks explain 20%, 10%, and 85% of the uncertainty in GDP growth, inflation, and the interest rate, respectively; and under the IT regime, all these percentages shrink to 1%–2%. The sensitivity analysis confirms the robustness of the main results. In general, the results show that MP has contributed to diminishing macroeconomic volatility in Peru.
KW - Deviance information criterion
KW - Marginal likelihood
KW - Monetary policy
KW - Peru
KW - Stochastic volatility
KW - Time-varying parameter VAR
UR - http://www.scopus.com/inward/record.url?scp=85201213724&partnerID=8YFLogxK
U2 - 10.1016/j.strueco.2024.08.003
DO - 10.1016/j.strueco.2024.08.003
M3 - Article
AN - SCOPUS:85201213724
SN - 0954-349X
VL - 71
SP - 270
EP - 288
JO - Structural Change and Economic Dynamics
JF - Structural Change and Economic Dynamics
ER -