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Title Incorporating financial sector risk into monetary policy models : application to Chile / Dale Gray [and others]
Published [Washington, D.C.] : International Monetary Fund, ©2011

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Description 1 online resource (35 pages) : illustrations
Series IMF working paper ; WP/11/228
IMF working paper ; WP/11/228.
Summary This paper builds a model of financial sector vulnerability and integrates it into a macroeconomic framework, typically used for monetary policy analysis. The main question to be answered with the integrated model is whether or not the central bank should include explicitly the financial stability indicator in its monetary policy (interest rate) reaction function. It is found in general, that including distance-to-default (dtd) of the banking system in the central bank reaction function reduces both inflation and output volatility. Moreover, the results are robust to different model calibrations: whenever exchange-rate pass-through is higher; financial vulnerability has a larger impact on the exchange rate, as well as on GDP (or the reverse, there is more effect of GDP on bank's equity - i.e., what we call endogeneity), it is more efficient to include dtd in the reaction function
Notes At head of title: Monetary and Capital Markets Department
Title from PDF title page (IMF Web site, viewed October 7, 2011)
"September 2011."
Available in PDF, ePUB, and Mobi formats on the Internet
Bibliography Includes bibliographical references
Subject Monetary policy -- Chile -- Econometric models
Banks and banking, Central -- Chile -- Econometric models
Banks and banking, Central -- Econometric models
Economic history
Monetary policy -- Econometric models
SUBJECT Chile -- Economic conditions. http://id.loc.gov/authorities/subjects/sh85023872
Subject Chile
Form Electronic book
Author Gray, Dale, 1953- author.
International Monetary Fund. Monetary and Capital Markets Department, issuing body.
ISBN 1283556618
9781283556613
1463959281
9781463959289
9781463926489
1463926480