Financial Conditions and Monetary Policy in Uruguay: An MS-VAR Approach

Accesible PDF image
Peer Reviewed icon Peer Reviewed
Author
Bucacos, Elizabeth
Date issued
Apr 2017
Subject
Private Investment;
Macroeconomy;
Monetary Policy;
Financial Market
JEL code
C34 - Truncated and Censored Models • Switching Regression Models;
E27 - Forecasting and Simulation: Models and Applications;
E44 - Financial Markets and the Macroeconomy;
E62 - Fiscal Policy
Country
Uruguay
Category
Working Papers
This study analyzes the effects of "financial stress" on the Uruguayan macroeconomy in the 1998Q3-2016Q2 period with the underlying idea that financial shocks propagate differently during "normal times" than during times of "stress." This behavior is captured in a multivariate framework through a Markovswitching vector auto regressive (MS-VAR) model. The evidence found so far supports the idea that financial conditions affect the macroeconomy, as they not only change the private investment long-run average growth rate but also directly modify the behavior of monetary policy.
Generative AI enabled