Abstract
This paper models the PBC's operating procedures in a two-stage vector autoregression framework. We decompose changes in policy variables into exogenous and endogenous components in order to find a “clean” monetary policy indicator whose changes are mainly policy induced. Our main findings are twofold. First, the PBC's operating procedures have evolved over time; since about 2006, they have developed to a relatively stable regime. Second, its operating procedures are neither pure interest rate targeting nor pure reserves targeting, but a mixture. A set of indicators all contain information about the policy stance. Finally, we construct a new composite indicator of the overall policy stance.
Original language | English |
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Pages (from-to) | 263-286 |
Number of pages | 24 |
Journal | Journal of International Money and Finance |
Volume | 59 |
Early online date | 9 Jul 2015 |
DOIs | |
Publication status | Published - Dec 2015 |