Financial%20Conditions%20and%20Monetary%20Policy%20in%20Uruguay%3AAn%20MS%2DVAR%20Approach

Working Papers

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


CODE: IDB-WP-796
AUTHOR(s): Bucacos, Elizabeth
PUBLISHED: April 2017
LANGUAGE: English
RELATED TOPICS: Macroeconomics
DOWNLOAD FILE IN: English

Abstract:

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.

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