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

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.
Publication date: April 2003
ISBN: 9781451849264
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Money and Monetary Policy , Money and Monetary Policy , exchange rate , central bank , inflation , Open Economy Macroeconomics

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