tailieunhanh - Preferences of the Central Reserve Bank of Peru and optimal monetary policy rules in the inflation targeting regime

Given these diverse viewpoints, understandably, the assessment of individual events was also different among investment banks. One bank considered the struggle about the early warning to Germany and Portugal in February, and the Council’s decision not to issue such a warning was considered a lost opportunity to enforce the Stability and Growth Pact as the existing procedure of fiscal co-ordination among European countries. 7 Conversely another bank argued “no warning, no problem,” since the two countries confirmed their commitment to their fiscal target. 8 The embarrassment of the “sinners” resulting from the public debate of the issue had been an effective mechanism to enforce commitment to the European fiscal. | BANCO CENTRAL DE RESERVA DEL PERÚ Preferences of the Central Reserve Bank of Peru and optimal monetary policy rules in the inflation targeting regime Nilda Mercedes Cabrera Pasca Edilean Kleber da Silva Bejarano Aragón and Marcelo Savino Portugal PUC-RJ Brazil. UFPb Brazil. UFRGS Brazil and CNPq DT. N 2011-010 Serie de Documentos de Trabajo Working Paper series Junio 2011 Los puntos de vista expresados en este documento de trabajo corresponden a los autores y no reflejan necesariamente la posición del Banco Central de Reserva del Perú. The views expressed in this paper are those of the authors and do not reflect necessarily the position of the Central Reserve Bank of Peru. Preferences of the Central Reserve Bank of Peru and Optimal Monetary Policy Rules in the inflation Targeting Regime Nilda Mercedes Cabrera Pasca1 Edilean Kleber da Silva Bejarano Aragón2 Marcelo Savino Portugal3 Abstract This study aims to identify the preferences of the monetary authority in the Peruvian regime of inflation targeting through the derivation of optimal monetary policy 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. Keywords Inflation target Central Bank .

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