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The paper extends Bernanke and Mihov's [6] closed-economy strategy for identification of monetary policy shocks to open-economy settings, accounting for the simultaneity between interest-rate and exchange-rate innovations. The methodology allows a separate treatment of two distinct monetary policy shocks, one that operates through open market operations, and another one that takes place through interventions in the foreign exchange market. Implementation of this strategy to the case of Argentina provides the stylized facts necessary to choose among competing theoretical models of this economy. In addition to studying the effects of monetary policy innovations, the present study sheds light on the endogenous component of monetary policy. In this regard, the paper finds that, notwithstanding the relative stability of the exchange rate and the accumulation of large amounts of international reserves, the central bank in Argentina has been far from absorbing balance of payments shocks in a currency-board fashion. The growing level of international reserves can be rationalized, instead, as the monetary authority's response to terms of trade, supply and domestic currency demand shocks.

Balance of payments --- Central bank --- Currencies and Exchange Rates --- Currency demand --- Debt Markets --- Domestic currency --- Economic Policy --- Economic Stabilization --- Economic Theory & Research --- Emerging Markets --- Exchange rate --- Finance and Financial Sector Development --- Foreign exchange --- Foreign exchange market --- Foreign exchange market intervention --- General equilibrium --- General equilibrium models --- Interest rate --- Interest-rate --- International reserves --- Macroeconomics and Economic Growth --- Monetary authority --- Monetary policies --- Monetary Policy --- Open Economies --- Open economy --- Open market operations --- Private Sector Development

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

The paper extends Bernanke and Mihov's [6] closed-economy strategy for identification of monetary policy shocks to open-economy settings, accounting for the simultaneity between interest-rate and exchange-rate innovations. The methodology allows a separate treatment of two distinct monetary policy shocks, one that operates through open market operations, and another one that takes place through interventions in the foreign exchange market. Implementation of this strategy to the case of Argentina provides the stylized facts necessary to choose among competing theoretical models of this economy. In addition to studying the effects of monetary policy innovations, the present study sheds light on the endogenous component of monetary policy. In this regard, the paper finds that, notwithstanding the relative stability of the exchange rate and the accumulation of large amounts of international reserves, the central bank in Argentina has been far from absorbing balance of payments shocks in a currency-board fashion. The growing level of international reserves can be rationalized, instead, as the monetary authority's response to terms of trade, supply and domestic currency demand shocks.

Balance of payments --- Central bank --- Currencies and Exchange Rates --- Currency demand --- Debt Markets --- Domestic currency --- Economic Policy --- Economic Stabilization --- Economic Theory & Research --- Emerging Markets --- Exchange rate --- Finance and Financial Sector Development --- Foreign exchange --- Foreign exchange market --- Foreign exchange market intervention --- General equilibrium --- General equilibrium models --- Interest rate --- Interest-rate --- International reserves --- Macroeconomics and Economic Growth --- Monetary authority --- Monetary policies --- Monetary Policy --- Open Economies --- Open economy --- Open market operations --- Private Sector Development

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Post-conflict countries receive substantial aid flows after the start of peace. While post-conflict countries' capacity to absorb aid (that is, the quality of their policies and institutions) is built up only gradually after the onset of peace, the evidence suggests that aid tends to peak immediately after peace is attained and decline thereafter. Aid composition broadly reflects post-conflict priorities, with large parts of aid financing social expenditure and infrastructure investment. Aid has significant short-term effects on the real exchange rate (RER), as inferred from the behavior of RER in the world. While moderate RER overvaluation is observed in post-conflicts, it cannot be traced down to the aid flows. The empirical evidence on world growth reveals new findings about the pattern of catch-up growth during post-conflicts and the role of key growth determinants on post-conflict growth. Aid is an important determinant of growth, both generally and more strongly during post-conflict periods. Because RER misalignment reduces growth, RER overvaluation during post-conflicts reduces catch-up growth. Aid and RER overvaluation combined also lower growth. But the negative growth effect of RER overvaluation declines with financial development.

Absorptive Capacities --- Assets --- Conflict and Development --- Currencies and Exchange Rates --- Current Account --- Debt Markets --- Depreciation --- Development Economics and Aid Effectiveness --- Domestic-Currency --- Dutch Disease --- Economic Conditions and Volatility --- Economic Growth --- Economic Theory and Research --- Economies --- Economy --- Emerging Markets --- Equilibrium --- Equilibrium Level --- Export Diversification --- Export Growth --- Finance and Financial Sector Development --- Macroeconomic Management --- Macroeconomics and Economic Growth --- Misalignment --- Overvaluation --- Post Conflict Reconstruction --- Poverty Reduction --- Private Sector Development --- Pro-Poor Growth --- Real Exchange Rate --- Real Exchange Rate Appreciation --- Real Exchange Rate Overvaluation --- Relative Price --- Risks --- Social Conflict and Violence --- Social Development