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Item type:Publication, Evolution of Monetary Policy in Peru: An Empirical Application using a Mixture Innovation TVP-VAR-SV Model(Pontificia Universidad Católica del Perú. Departamento de Economía, 2020-02)This paper discusses the evolution of monetary policy (MP) in Peru in 1996Q1-2016Q4 using a mixture innovation time-varying parameter vector autoregressive model with stochastic volatility (TVP-VAR-SV) as proposed by Koop et al. (2009). The main empirical results are: (i) the VAR coefficients and volatilities change more gradually than the covariance errors over time; (ii) the volatility of MP shocks was higher under the pre-Inflation Targeting (IT) regime; (iii) a surprise increase in the interest rate produces GDP growth falls and reduces ináation in the long run; (iv) the interest rate reacts more quickly to aggregate supply (AS) shocks than to aggregate demand (AD) shocks; (v) MP shocks explain a high percentage of domestic variable behavior under the pre-IT regime but their contribution decreases under the IT regime. - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Impact of Monetary Policy Shocks in the Peruvian Economy Over Time(Pontificia Universidad Católica del Perú. Departamento de Economía, 2023-08)We investigate the evolution of the impact of monetary policy (MP) shocks in Peru in 1996Q1-2018Q2 using a set of time-varying parameter vector autoregressive models with stochastic volatility (TVP-VAR- SV), as proposed by Chan and Eisenstat (2018). The main results are: (i) the volatilities, intercepts, and contemporaneous coe cients change more gradually than VAR coe cients over time; (ii) the volatility of MP shocks falls from 4% to 0.3% on average during the In ation Targeting (IT) regime; (iii) in the long run, a contractionary MP shock decreases both gross domestic product (GDP) growth and in ation by 0.28% and 0.1%, respectively; (iv) the interest rate reacts faster to aggregate supply shocks than to both aggregate demand shocks and exchange rate shocks; (v) under the pre-IT regime, MP shocks explain almost 20%, 10%, and 85% of the uncertainty in GDP growth, in ation, and the interest rate, respectively; and under the IT regime, all these percentages shrink to 1-2%. The sensitivity analysis con rms the robustness of the main results across various prior speci cations, measures of external and domestic variables, and recursive identi cations. In general, the results show that MP has contributed to diminishing macroeconomic volatility in Peru. - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Regime-Switching, stochastic volatilty and impacts of monetary policy shocks on macroeconomic fluctuations in Peru(Pontificia Universidad Católica del Perú. Departamento de Economía, 2024-08)This paper utilizes regime-switching VAR models with stochastic volatility (RS-VAR-SV) to analyze the impact and evolution of monetary policy shocks and their contribution to the dynamics of GDP growth, inflation, and the interest rate in Peru for the period from 1994Q3 to 2019Q4. The main findings are: (i) the best-fifting models incorporate only SV; (ii) there are two distinct regimes coinciding with the implementation of the inflation targeting (IT) scheme; (iii) the volatility of GDP growth and inflation began to decrease in the early 1990s, while interest rate volatility declined following IT implementation; and (iv) pre-IT, monetary policy shocks accounted for 15%, 30%, and 90% of the forecast error variance decomposition for in ation, GDP growth, and the interest rate in the long term, respectively. Following IT adoption, monetary policy ceased to be a source of uncertainty for the economy. These results are robust to changes in priors, domestic and external variables, the number of regimes, and the ordering and number of variables of the model.