The Impact of Monetary Policy on the Bilateral Exchange Rate: Chile Versus the United States

23 Pages Posted: 29 Jan 2006

See all articles by Jeromin Zettelmeyer

Jeromin Zettelmeyer

Peter G. Peterson Institute for International Economics; CEPR

Date Written: April 2003

Abstract

This paper examines the reaction of the bilateral Ch$/US$ exchange rate to monetary policy actions in Chile and the United States. The approach is to regress the change in the exchange rate following a policy announcement on changes in market interest rates in response to the same announcement. U.S. monetary policy actions that raise the three-month treasury bill rate by 1 percentage point lead to depreciations of the Chilean peso by about 1.5 to 2 percent. The exchange rate also reacts to monetary policy actions in Chile, but the response appears to be smaller, and cannot be estimated with much precision on the available sample.

Keywords: Monetary Policy, Interest Rates, Exchange Rates

JEL Classification: E52, E58, F31, F41

Suggested Citation

Zettelmeyer, Jeromin, The Impact of Monetary Policy on the Bilateral Exchange Rate: Chile Versus the United States (April 2003). IMF Working Paper, Vol. , pp. 1-23, 2003. Available at SSRN: https://ssrn.com/abstract=879146

Jeromin Zettelmeyer (Contact Author)

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

CEPR ( email )

London
United Kingdom

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