Preferences of the Central Reserve Bank of Peru and optimal monetary rules in the inflation targeting regime
DOI:
https://doi.org/10.1590/S0101-41612012000100001Keywords:
inflation target, central bank preferences, optimal monetary rules, Central Bank of PeruAbstract
This study aims to identify the preferences of the monetary authority in the Peruvian regime of inflation targeting through the derivation of optimal monetary rules. To achieve that, we used a calibration strategy based on the choice of values of the parameters of preferences that minimize the square deviation between the true interest rate and interest rate optimal simulation. The results showed that the monetary authority has applied a system of flexible inflation targeting, prioritizing the stabilization of inflation, but without disregarding gradualism in interest rates. On the other hand, concern over output stabilization has been minimal, revealing that the output gap has been important because it contains information about future inflation and not because it is considered a variable goal in itself. Finally, when the smoothing of the nominal exchange rate is considered in the loss function of the monetary authority, the rank order of preferences has been maintained and the smoothing of the exchange rate proved insignificant.
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References
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BANCO CENTRAL DO RESERVA DO PERU. Reportes de Inflación: Panorama Actual y Proyecciones (2002-2009). Disponível em: <www.bcrp.gob.pe/publicaciones >. Acesso em: 04 de abr. 2009.
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Bejarano,W.B. Algumas lecciones y preferências reveladas de la Política Monetária del Perú em la última década. Documento de Trabajo, Banco Central de Reserva del Peru, n. 14, 2001. Disponível em: <http://www.bcrp.gob.pe/docs/publicaciones/Documentos-de-trabajo/2001/Documento-trabajo-02-2001.pdf. >Acesso em: 15 de Abr. 2009.
Castelnuevo, E.; Surico, P. What does monetary policy reveal about a Central Bank’s Preferences? Economic Notes, v.32, n3, p. 335-359, 2003.
Castelnuevo, E.; Surico, P. Model Uncertainty, optimal monetary policy and the preferences of the Fed. Scottish Journal of Political Economy, v 51,n 1, p. 105-125.2004.
Castillo, P.; Humala, A.; Tuesta, V. Política monetaria, cambios de régimen de política monetaria e incertidumbre inflacionaria en el Perú (1949-2006). Documento de Trabajo, Banco Central de Reserva del Peru, n. 5, 2007a. Disponível em:< http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2007/Working-Paper-05-2007.pdf >. Acesso em: 17 de Abr. 2009.
Castillo, P.; Montoro, C.; Tuesta, V. Hechos estilizados de la economía peruana. Revista de Estudios Económicos del Banco Central de Reserva Del Peru, n. 14, 2007b.
Cecchetti, S.G.; Krause, S. Financial Structure, Macroeconomic Stability and Monetary Policy. National Bureau of Economic Research, n. 8354, 2001.
Cecchetti, S.G.; Ehrmann, M. Does inflation targeting increase output volatility? An international comparison of policymakers’ preferences and outcomes. Cambridge: National Bureau of Economic Research, n.7426, 1999.
Cecchetti, S.G.; McConnell, M; Quiroz, G. Policymakers’ Revealed Preferences and the Output-Inflation Variability Trade-Off: Implications for the European System of Central Banks. The Manchester School, v.70, n. 4, p. 596-618, 2002.
Chong, Y.; Hendry, D. Econometric Evaluation of Linear Macro-economic Models. Review of Economic Studies, v. 53, n. 4, p. 671-690, 1986.
Collins, S.; Siklos, P. L. Optimal monetary policy rules and inflation targets: are Australia, Canada, and New Zealand different from the U.S.? Open Economies Review, v.15, n.4, p. 347- 362, 2004.
Chow, G. Estimation of Rational Expectations Models. American economic Review, v. 71, n. 2, p. 211-216, 1981.
Dennis, R. The policy preferences of the US Federal Reserve. Journal of Applied Econometrics, v.21, n.1, p. 55- 77, 2006.
Dennis, R. Inferring Policy Objectives from Economic Outcomes. Journal of Oxford Bulletin of Economics and Statistics, v.66, n. 1, p. 735-764, 2004.
Departamento de Modelos Macroeconômicos BCRP. Modelo de Proyección Trimestral del BCRP. Documento de Trabajo, Banco Central de Reserva del Peru, n. 6, 2009. Disponivel em: < http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-trabajo/2009/Documento-Trabajo-06-2009.pdf.>. Acesso em: 17 de Abr. 2009.
Estrella, A.; Fuhrer, J. Dynamic Inconsistencies: Counterfactual Implications of a Class of Rational Expectations Model. American Economic Review, v.96, n. 4, p.1013-1028,2002.
Miranda, M.; Fackler, P. Applied Computational Economics and Finance. Massachusetts: The MIT Press, p. 288- 292, 2002.
Favero, C. A.; E Rovelli, R. Macroeconomic Stability and the preferences of the Fed: A formal analysis,1961-98. Journal of Money, Credit, and Banking, v. 35, n. 4, p 545-556, 2003.
Fuhrer, J. The (un) importance of forward-looking behavior in price specifications. Journal of Money, Credit and Banking, v. 28, n. 3, p. 338-350.1997.
Goñi, P. A.; Ormeño, S.A. Modelación e Identificación de las Preferencias Del Banco Central en la Aplicación de Política Monetária,1999.Consorcio de Investigación Económica e Social ( CIES) e Universidad Del Pacifico Centro de Investigación, (CIUP). Documento de Trabalho, disponível em: < http://www.cies.org.pe/docs/investigaciones/politica-macroeconomica-y- crecimiento/preferencias-banco-central> . Acesso 04 de Abr. 2009
Hansen, L.; Sargent, T. Formulating and estimating dynamic linear rational expectations models. Journal of Economic Dynamics and Control, v.2, 1980.
Hansen, L.; Sargent, T. Recursive models of dynamic linear economies. 2004. Mimeo.
Ilbas, P. Revealing the preferences of the US Federal Reserve. Bank of Norges, Working Paper, n. 21, 2008.
King, M. Changes in UK Monetary Policy: Rules, Discretion in Practice. Journal of Monetary Economics, v. 39, n. 1, p. 81-97, 1997.
Leiderman, L.; Maino, R.; Parrado, E. Inflation targeting in Dollarized Economies. IMF Working paper, n. 157, 2006
Ljungqvist, L.; Sargent, T. Recursive macroeconomic theory. 2a ed. Cambridge: MIT Press, Chapter n.5, 2004.
Lucas, R. Econometric policy evaluation a critique. Carnegie-Rochester Conference Series on Public Policy, v.1, p. 19-46, 1976.
MINISTERIO DE ENERGIA Y MINAS PERU. Anuário Minero 2007. Disponível em: < http://www.minem.gob.pe/publicacion.php?idSector=1&idpublicacion=20>. Acesso em 12 de Nov. 2009
Ozlale, U. price stability vs. Output stability: tales of Federal reserve administrations. Journal of Economic Dynamics and Control, v. 17, n. 9, p.1595-1610, 2003.
Quezada, W. D. Reglas Monetarias para América Latina un Enfoque Computable. Banco Central de Reserva Del Peru, 2004. Disponível em: < http://www.cemla.org/pdf/red/PE_diego_winkenried.pd f>. Acesso em: 18 de Nov. 2009.
Rodriguez, G. Eficiencia de la Política Monetaria y la Estabilidad de las preferencias del Banco Central una evidencia para el Perú. Revista de Estudios Económicos del Banco Central de Reserva Del Peru, n. 15, 2008.
Rodriguez, G. Stability of Central bank Preferences, Macroeconomic Shocks, and Efficiency of the Monetary Policy, Empirical Evidence for Canada. University of Ottawa, Working Paper, n. 603, 2006.
Rojas, C. F. El efecto del suavizamiento de la tasa de interes em uma regla de política monetária bajo um régimen de “Inflation Targeting”: el caso peruano. Documento de Trabajo, del Banco Central de Reserva Del Peru, n.15,2001. Disponível em: < http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-trabajo/2001/Documento-Trabajo-01-2001.pdf >. Acesso em: 18 de Abr. 2009.
Rudebusch, G. D.; Svensson, L. E. O. Policy rules for inflation targeting. In: Taylor, JB (ed). Monetary policy rules. Chicago: The University of Chicago Press, 1999.
Sack, B.; Wieland, V. interest-rate smoothing and optimal monetary policy: a review of recent empirical evidence. Journal of Economics and Business,v. 52, n.1-2, p. 205-228, 2000.
Salemi, M. K . Revealed Preference of the Federal Reserve: Using Inverse-Control Theory to Interpret the Policy Equation of a Vector Autoregression. Journal of Business & Economic Statistics, v. 13, n. 4, p. 419-433,1995.
Salas, J. ¿Qué explica las fluctuaciones de la inflación en el Perú en el periodo 2002 – 2008? Evidencia de un análisis VAR estructural, Revista de Estudios Económicos del Banco Central de Reserva Del Peru, n. 16, 2009.
Söderlind, P.; Söderström, U.; Vredin, A. Can calibrated New-keynesian models of monetary policy fit the facts? Stockholm: Sveriges Riksbank, 2002, Working paper, n. 140.
Svensson, L. E. O. Inflation Targeting as a Monetary Policy Rule. Journal of Monetary Economics, v. 43, p. 607-654, 1999.
Tachibana, M. Central Bank’s preferences in Japan, the UK, and the US. Japan and the World Economy, v.16, p. 81-93, 2004.
Taylor, J. B. Discretion versus policy rules in practice. Carnegie- Rochester conference series on Public Policy, v. 39, 1993.
Taylor, J. B. A Historical analysis of Monetary Policy Rules. National Bureau of Economic Research, Working Paper, n. 6768, 1998.
Walsh, E. C. Monetary Theory and Policy. 2a ed. Cambridge, Massachusetts: The MIT Press, p. 323-325, 2003.
Woodford, M. Optimal Interest Rate Smoothing. Review of Economic Studies, v. 70, p. 861-886. 2004
Woodford, M.Pitfalls of Forward Looking Monetary Policy. American Economic Review Papers and Proceedings, v. 90, p 100-104. 2000.
BANCO CENTRAL DO RESERVA DO PERU. Reportes de Inflación: Panorama Actual y Proyecciones (2002-2009). Disponível em: <www.bcrp.gob.pe/publicaciones >. Acesso em: 04 de abr. 2009.
BANCO CENTRAL DO RESERVA DO PERU. Memorias Anuales del Banco Central.1991-2007. Disponível em: http://www.bcrp.gob.pe/publicaciones/memoria-anual.html Acesso em: 04 de Abril. 2009.
Bejarano,W.B. Algumas lecciones y preferências reveladas de la Política Monetária del Perú em la última década. Documento de Trabajo, Banco Central de Reserva del Peru, n. 14, 2001. Disponível em: <http://www.bcrp.gob.pe/docs/publicaciones/Documentos-de-trabajo/2001/Documento-trabajo-02-2001.pdf. >Acesso em: 15 de Abr. 2009.
Castelnuevo, E.; Surico, P. What does monetary policy reveal about a Central Bank’s Preferences? Economic Notes, v.32, n3, p. 335-359, 2003.
Castelnuevo, E.; Surico, P. Model Uncertainty, optimal monetary policy and the preferences of the Fed. Scottish Journal of Political Economy, v 51,n 1, p. 105-125.2004.
Castillo, P.; Humala, A.; Tuesta, V. Política monetaria, cambios de régimen de política monetaria e incertidumbre inflacionaria en el Perú (1949-2006). Documento de Trabajo, Banco Central de Reserva del Peru, n. 5, 2007a. Disponível em:< http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2007/Working-Paper-05-2007.pdf >. Acesso em: 17 de Abr. 2009.
Castillo, P.; Montoro, C.; Tuesta, V. Hechos estilizados de la economía peruana. Revista de Estudios Económicos del Banco Central de Reserva Del Peru, n. 14, 2007b.
Cecchetti, S.G.; Krause, S. Financial Structure, Macroeconomic Stability and Monetary Policy. National Bureau of Economic Research, n. 8354, 2001.
Cecchetti, S.G.; Ehrmann, M. Does inflation targeting increase output volatility? An international comparison of policymakers’ preferences and outcomes. Cambridge: National Bureau of Economic Research, n.7426, 1999.
Cecchetti, S.G.; McConnell, M; Quiroz, G. Policymakers’ Revealed Preferences and the Output-Inflation Variability Trade-Off: Implications for the European System of Central Banks. The Manchester School, v.70, n. 4, p. 596-618, 2002.
Chong, Y.; Hendry, D. Econometric Evaluation of Linear Macro-economic Models. Review of Economic Studies, v. 53, n. 4, p. 671-690, 1986.
Collins, S.; Siklos, P. L. Optimal monetary policy rules and inflation targets: are Australia, Canada, and New Zealand different from the U.S.? Open Economies Review, v.15, n.4, p. 347- 362, 2004.
Chow, G. Estimation of Rational Expectations Models. American economic Review, v. 71, n. 2, p. 211-216, 1981.
Dennis, R. The policy preferences of the US Federal Reserve. Journal of Applied Econometrics, v.21, n.1, p. 55- 77, 2006.
Dennis, R. Inferring Policy Objectives from Economic Outcomes. Journal of Oxford Bulletin of Economics and Statistics, v.66, n. 1, p. 735-764, 2004.
Departamento de Modelos Macroeconômicos BCRP. Modelo de Proyección Trimestral del BCRP. Documento de Trabajo, Banco Central de Reserva del Peru, n. 6, 2009. Disponivel em: < http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-trabajo/2009/Documento-Trabajo-06-2009.pdf.>. Acesso em: 17 de Abr. 2009.
Estrella, A.; Fuhrer, J. Dynamic Inconsistencies: Counterfactual Implications of a Class of Rational Expectations Model. American Economic Review, v.96, n. 4, p.1013-1028,2002.
Miranda, M.; Fackler, P. Applied Computational Economics and Finance. Massachusetts: The MIT Press, p. 288- 292, 2002.
Favero, C. A.; E Rovelli, R. Macroeconomic Stability and the preferences of the Fed: A formal analysis,1961-98. Journal of Money, Credit, and Banking, v. 35, n. 4, p 545-556, 2003.
Fuhrer, J. The (un) importance of forward-looking behavior in price specifications. Journal of Money, Credit and Banking, v. 28, n. 3, p. 338-350.1997.
Goñi, P. A.; Ormeño, S.A. Modelación e Identificación de las Preferencias Del Banco Central en la Aplicación de Política Monetária,1999.Consorcio de Investigación Económica e Social ( CIES) e Universidad Del Pacifico Centro de Investigación, (CIUP). Documento de Trabalho, disponível em: < http://www.cies.org.pe/docs/investigaciones/politica-macroeconomica-y- crecimiento/preferencias-banco-central> . Acesso 04 de Abr. 2009
Hansen, L.; Sargent, T. Formulating and estimating dynamic linear rational expectations models. Journal of Economic Dynamics and Control, v.2, 1980.
Hansen, L.; Sargent, T. Recursive models of dynamic linear economies. 2004. Mimeo.
Ilbas, P. Revealing the preferences of the US Federal Reserve. Bank of Norges, Working Paper, n. 21, 2008.
King, M. Changes in UK Monetary Policy: Rules, Discretion in Practice. Journal of Monetary Economics, v. 39, n. 1, p. 81-97, 1997.
Leiderman, L.; Maino, R.; Parrado, E. Inflation targeting in Dollarized Economies. IMF Working paper, n. 157, 2006
Ljungqvist, L.; Sargent, T. Recursive macroeconomic theory. 2a ed. Cambridge: MIT Press, Chapter n.5, 2004.
Lucas, R. Econometric policy evaluation a critique. Carnegie-Rochester Conference Series on Public Policy, v.1, p. 19-46, 1976.
MINISTERIO DE ENERGIA Y MINAS PERU. Anuário Minero 2007. Disponível em: < http://www.minem.gob.pe/publicacion.php?idSector=1&idpublicacion=20>. Acesso em 12 de Nov. 2009
Ozlale, U. price stability vs. Output stability: tales of Federal reserve administrations. Journal of Economic Dynamics and Control, v. 17, n. 9, p.1595-1610, 2003.
Quezada, W. D. Reglas Monetarias para América Latina un Enfoque Computable. Banco Central de Reserva Del Peru, 2004. Disponível em: < http://www.cemla.org/pdf/red/PE_diego_winkenried.pd f>. Acesso em: 18 de Nov. 2009.
Rodriguez, G. Eficiencia de la Política Monetaria y la Estabilidad de las preferencias del Banco Central una evidencia para el Perú. Revista de Estudios Económicos del Banco Central de Reserva Del Peru, n. 15, 2008.
Rodriguez, G. Stability of Central bank Preferences, Macroeconomic Shocks, and Efficiency of the Monetary Policy, Empirical Evidence for Canada. University of Ottawa, Working Paper, n. 603, 2006.
Rojas, C. F. El efecto del suavizamiento de la tasa de interes em uma regla de política monetária bajo um régimen de “Inflation Targeting”: el caso peruano. Documento de Trabajo, del Banco Central de Reserva Del Peru, n.15,2001. Disponível em: < http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-trabajo/2001/Documento-Trabajo-01-2001.pdf >. Acesso em: 18 de Abr. 2009.
Rudebusch, G. D.; Svensson, L. E. O. Policy rules for inflation targeting. In: Taylor, JB (ed). Monetary policy rules. Chicago: The University of Chicago Press, 1999.
Sack, B.; Wieland, V. interest-rate smoothing and optimal monetary policy: a review of recent empirical evidence. Journal of Economics and Business,v. 52, n.1-2, p. 205-228, 2000.
Salemi, M. K . Revealed Preference of the Federal Reserve: Using Inverse-Control Theory to Interpret the Policy Equation of a Vector Autoregression. Journal of Business & Economic Statistics, v. 13, n. 4, p. 419-433,1995.
Salas, J. ¿Qué explica las fluctuaciones de la inflación en el Perú en el periodo 2002 – 2008? Evidencia de un análisis VAR estructural, Revista de Estudios Económicos del Banco Central de Reserva Del Peru, n. 16, 2009.
Söderlind, P.; Söderström, U.; Vredin, A. Can calibrated New-keynesian models of monetary policy fit the facts? Stockholm: Sveriges Riksbank, 2002, Working paper, n. 140.
Svensson, L. E. O. Inflation Targeting as a Monetary Policy Rule. Journal of Monetary Economics, v. 43, p. 607-654, 1999.
Tachibana, M. Central Bank’s preferences in Japan, the UK, and the US. Japan and the World Economy, v.16, p. 81-93, 2004.
Taylor, J. B. Discretion versus policy rules in practice. Carnegie- Rochester conference series on Public Policy, v. 39, 1993.
Taylor, J. B. A Historical analysis of Monetary Policy Rules. National Bureau of Economic Research, Working Paper, n. 6768, 1998.
Walsh, E. C. Monetary Theory and Policy. 2a ed. Cambridge, Massachusetts: The MIT Press, p. 323-325, 2003.
Woodford, M. Optimal Interest Rate Smoothing. Review of Economic Studies, v. 70, p. 861-886. 2004
Woodford, M.Pitfalls of Forward Looking Monetary Policy. American Economic Review Papers and Proceedings, v. 90, p 100-104. 2000.
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Copyright (c) 2012 Nilda Mercedes Cabrera Pasca, Edilean Kleber da Silva Bejarno Aragón, Marcelo Savino Portugal
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How to Cite
Pasca, N. M. C., Aragón, E. K. da S. B., & Portugal, M. S. (2012). Preferences of the Central Reserve Bank of Peru and optimal monetary rules in the inflation targeting regime. Estudos Econômicos (São Paulo), 42(1), 5-42. https://doi.org/10.1590/S0101-41612012000100001
