Measures of Monetary Policy in Latin America

摘要

Although the instrumentation of monetary policy is still constantly debated in the existing literature, there is a paucity of studies investigating this problem in emerging economies, especially after the recent global financial crisis. The objective of the paper is to investigate the role of interest rate and money supply as an overall measure of monetary policy in four major Latin America economies that follow the inflation targeting framework. Evidence from causality test and the analysis of impulse response function shows that both indicators have explanation for price movement. The price puzzle is clearly visible follows positive shocks to interest rate. These findings suggest that a composite index can be a better measure of monetary policy and other means should be conducted to improve the performance of the interest rate policy.