Cerdeiro, Diego A.2012-03-192012-03-192010-03-01https://hdl.handle.net/10986/3739The 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.CC BY 3.0 IGOABSOLUTE VALUEACCOUNTINGASSETSAUTOREGRESSIONBALANCE OF PAYMENTSBALANCE SHEETBALANCE-OF-PAYMENTS CRISESBANK BONDSBONDSCAPITAL ACCOUNTCASH BALANCESCENTRAL BANKCENTRAL BANK ASSETCENTRAL BANKSCHECKING ACCOUNTSCHECKSCLOSED ECONOMYCOMMERCIAL BANKCOMMERCIAL BANKSCOMMODITIESCOMMODITYCOMMODITY PRICECOMMODITY PRICESCONSUMPTION EXPENDITURESCOVARIANCE MATRICESCOVARIANCE MATRIXCREDIBILITYCURRENCY BOARDCURRENCY CRISESCURRENCY DEMANDCURRENCY SUPPLYCURRENCY TRANSACTIONCURRENT ACCOUNTCURRENT ACCOUNT DEFICITCURRENT ACCOUNT SHOCKCURRENT ACCOUNT SHOCKSCURRENT ACCOUNT SURPLUSDEPENDENT VARIABLEDEPOSITDEPRECIATIONDEPRECIATION RATEDISCOUNT RATEDOLLAR VALUEDOMESTIC CURRENCIESDOMESTIC CURRENCYDOMESTIC FINANCIAL INSTITUTIONSDOMESTIC INTEREST RATEDOMESTIC INTEREST RATESDOMESTIC LIQUIDITYDOMESTIC PRICESECONOMETRICSECONOMIC CONDITIONSECONOMIC POLICYECONOMIC RESEARCHECONOMIC THEORYENDOGENOUS VARIABLESEQUATIONSEQUILIBRIUM CONDITIONEQUILIBRIUM CONDITIONSERROR TERMSEXCESS DEMANDEXCESS LIQUIDITYEXCESS SUPPLYEXCHANGE RATEEXCHANGE RATE APPRECIATIONEXCHANGE RATE SHOCKSEXCHANGE RATESEXCHANGE TRANSACTIONSEXCHANGE-RATEEXOGENOUS VARIABLESEXPORTSEXTERNAL POSITIONFEDERAL RESERVEFEDERAL RESERVE BANKFINANCIAL SYSTEMFISCAL POLICYFISCAL SHOCKSFIXED EXCHANGE RATEFLEXIBLE EXCHANGE RATESFOREIGN ASSETSFOREIGN CURRENCYFOREIGN DIRECT INVESTORSFOREIGN EXCHANGEFOREIGN EXCHANGE MARKETFOREIGN EXCHANGE MARKET INTERVENTIONFOREIGN EXCHANGE MARKETSFOREIGN INTERESTFOREIGN INTEREST RATESGDPGDP DEFLATORGENERAL EQUILIBRIUMGENERAL EQUILIBRIUM MODELSGROSS DOMESTIC PRODUCTHOLDINGSIMPORTSINCOMEINDUSTRIAL COUNTRIESINFLATIONINFLATION RATEINSTRUMENTINTEREST PARITYINTEREST RATEINTEREST-RATEINTERNATIONAL BANKINTERNATIONAL ECONOMICSINTERNATIONAL ECONOMIESINTERNATIONAL RESERVESINTERPOLATIONLENDERSLIABILITYLIQUIDITYLOCAL CURRENCYMACROECONOMIC MODELSMACROECONOMICSMARKET CONDITIONSMONETARY AGGREGATESMONETARY AUTHORITIESMONETARY AUTHORITYMONETARY CONDITIONSMONETARY ECONOMICSMONETARY POLICIESMONETARY POLICYMONETARY TARGETMONETARY TRANSMISSIONMONEY DEMANDMONEY SUPPLYMONIESNOMINAL INTEREST RATESOIL PRICEOPEN ECONOMIESOPEN ECONOMYOPEN MARKETOPEN MARKET OPERATIONOPEN MARKET OPERATIONSOUTPUTPOLICY ON EXCHANGE RATESPOLITICAL ECONOMYPORTFOLIOPORTFOLIOSPRICE INDEXRANDOM WALKRATE OF GROWTHREAL GROSS DOMESTIC PRODUCTREAL INTERESTREAL INTEREST RATEREJECTIONREPOSRESPONSE TO SHOCKSSHORT-TERM INTEREST RATESHORT-TERM INTEREST RATESSLOWDOWNSTOCKSSTRUCTURAL SHOCKSTRUCTURAL SHOCKSSUPPLY SHOCKSUPPLY SHOCKSTIGHT MONETARY POLICYTOTAL RESERVESTRADE BALANCETRADE DATATRADE GROWTHTRADE SHOCKTRADE SHOCKSTRANSMISSION MECHANISMTREASURYUNANTICIPATED DEPRECIATIONUNCERTAINTYVOLATILITYWORLD INTEREST RATESWorld Bank10.1596/1813-9450-5252