Central bank research hub - Papers by Javier García-Cicco
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Research hub papers by author Javier García-CiccoenA TNT DSGE Model for Chile: Explaining the ERPT
https://si2.bcentral.cl/public/pdf/documentos-trabajo/pdf/dtbc868.pdf
Central Bank of Chile Working Papers by Mariana García-Schmidt and Javier García-CiccoA TNT DSGE Model for Chile: Explaining the ERPT2020-02-01T00:00:00ZWe present a fully-edged dynamic stochastic general equilibrium (DSGE) model for the Chilean economy to explain the economy's adjustments to external shocks, explicitly separating between tradable and non-tradable sectors (TNT). The model was built to explain Chile's linkages with the external sector, to recognize that the sectors of the economy have particular price dynamics that are affected differently by shocks that move the nominal exchange rate, and to study different measures of exchange rate pass through (ERPT). We show unconditional and conditional ERPT measures. The former measures are comparable with the empirical literature, while the latter are defined after a particular shock hit the economy. We highlight important differences in their magnitudes and in their effect on different prices. While a shock to international prices has a transitory and low ERPT, one that affects the uncovered interest rate parity condition has a very high and persistent ERPT for all price indexes. In addition, the prices that are more rapidly affected are those of tradable sectors, while non-tradable prices are affected with a lag, but for longer. We use the model to show that the conditional ERPT measures could have helped to anticipate a great part of the inflationary effects of the depreciation following the tapering announcements of the US in 2013-2015, which was not possible using unconditional ERPT measures of the empirical literature.A TNT DSGE Model for Chile: Explaining the ERPTFull texthttps://si2.bcentral.cl/public/pdf/documentos-trabajo/pdf/dtbc868.pdfMariana García-SchmidtJavier García-CiccoMariana García-Schmidt and Javier García-Cicco2020-02Central Bank of Chile Working PapersFinancial Frictions and the Transmission of Foreign Shocks in Chile
http://www.bcentral.cl//www.bcentral.cl/eng/studies/working-papers/pdf/dtbc722.pdf
Central Bank of Chile Working Papers by Javier García-Cicco, Markus Kirchner, Santiago JustelFinancial Frictions and the Transmission of Foreign Shocks in Chile2014-02-07T06:33:00ZWe set up and estimate a DSGE model of a small open economy to assess the role of domestic financial frictions in propagating foreign shocks. In particular, the model features two types of financial frictions: one in the relationship between depositors and banks (following Gertler and Karadi, 2011) and the other between banks and borrowers (along the lines of Bernanke et al, 1999). We use Chilean data to estimate the model, following a Bayesian approach. We find that the presence of financial frictions increases the importance of foreign shocks in explaining consumption, inflation, the policy rate, the real exchange rate and the trade balance. In contrast, under financial frictions the role of these foreign shocks in explaining output and investment is somehow reduced. The behavior of the real exchange rate and its interaction with the financial frictions is key to understand the results.Financial Frictions and the Transmission of Foreign Shocks in ChileAbstracthttp://www.bcentral.cl/eng/studies/working-papers/722.htmFull texthttp://www.bcentral.cl//www.bcentral.cl/eng/studies/working-papers/pdf/dtbc722.pdfMarkus KirchnerSantiago JustelJavier García-CiccoJavier García-Cicco, Markus Kirchner, Santiago Justel2014-01Central Bank of Chile Working PapersOn the Quantitative Effects of Unconventional Monetary Policies in Small Open Economies
http://www.ijcb.org/journal/ijcb11q1a3.pdf
IJCB International Journal of Central Banking by Javier García-CiccoOn the Quantitative Effects of Unconventional Monetary Policies in Small Open Economies2011-02-28T17:40:59ZThis paper quantitatively evaluates the effects of several unconventional monetary policies for small open economies. In particular, a New Keynesian model is extended to include a liquidity premium, deviations from uncovered interest rate parity, and a premium in the term structure of interest rates, allowing the central bank to choose, in addition to its policy rate, the size and composition of its balance sheet. The model is calibrated to the case of Chile. We find that policies affecting the liquidity channel can potentially have large effects, but these depend on expectations about the future policy rate. On the other hand, alternatives working through the term premium have smaller effects, but they are less dependent on the expected path of the reference rate. We also study the possibility of undoing the unconventional policy as a possible exit strategy, with results indicating that this alternative may induce a significant slowdown, particularly if it is anticipated. Finally, we also consider the alternative of driving down the policy rate to its lower bound and maintaining it there for a prolonged period. While this policy can also be greatly expansionary, particularly after contractionary shocks, credibility issues regarding the promise of keeping the rate low for some time can severely undermine these effects.On the Quantitative Effects of Unconventional Monetary Policies in Small Open EconomiesAbstracthttp://www.ijcb.org/journal/ijcb11q1a3.htmFull texthttp://www.ijcb.org/journal/ijcb11q1a3.pdfJavier García-CiccoJavier García-Cicco2011-02IJCB International Journal of Central BankingModeling Copper Price: A Regime-Switching Approach
http://www.bcentral.cl/eng/studies/working-papers/pdf/dtbc613.pdf
Central Bank of Chile Working Papers by Javier García - Cicco, Roque MonteroModeling Copper Price: A Regime-Switching Approach2011-02-28T17:36:00ZThis paper explores the virtues of Markov-Switching models to characterize the behavior of copper price. In particular, we study the performance of several univariate specifications of this type of models, both in and out of sample, comparing them also with constant parameter models such as ARMA and GARCH. The main finding is that allowing for a regime-switching variance in the error term is most relevant in explaining the behavior of this price.Modeling Copper Price: A Regime-Switching ApproachAbstracthttp://www.bcentral.cl/eng/studies/working-papers/613.htmFull texthttp://www.bcentral.cl/eng/studies/working-papers/pdf/dtbc613.pdfRoque MonteroJavier García-CiccoJavier García - Cicco, Roque Montero2011-02Central Bank of Chile Working PapersHeterodox Central Banking
http://www.bcentral.cl/eng/studies/working-papers/fichas/586.htm
Central Bank of Chile Working Papers by Luis Felipe Céspedes, Roberto Chang, Javier García-CiccoHeterodox Central Banking2010-07-10T06:23:00ZHeterodox Central BankingAbstracthttp://www.bcentral.cl/eng/studies/working-papers/fichas/586.htmLuis Felipe CéspedesJavier García-CiccoRoberto ChangLuis Felipe Céspedes, Roberto Chang, Javier García-Cicco2010-07Central Bank of Chile Working PapersEstimating Models for Monetary Policy Analysis in Emerging Countries
http://www.bcentral.cl/eng/studies/working-papers/pdf/dtbc561.pdf
Central Bank of Chile Working Papers by Javier García-CiccoEstimating Models for Monetary Policy Analysis in Emerging Countries2010-03-22T17:38:00ZWe estimate a DSGE model of an emerging country containing many frictions that, as has been recently argued, impose non-trivial constraints for monetary-policy design in these economies. In particular, our framework features a sectoral decomposition of the productive sector, the use of intermediate inputs, imperfect pass-through, endogenous premium to finance capital accumulation, balance sheet effects due to liability dollarization, currency substitution, price and wage stickiness, and dynamics driven by eleven shocks. We use a Bayesian approach to Mexican data to address three main questions: i) can the model satisfactorily fit the data? Our answer is generally yes, with some caveats; ii) are the estimated parameters similar to those usually calibrated in policy-related studies? The answer is negative, particularly for those describing financial frictions, price stickiness and money demand. Finally, which of the emerging-markets¿ frictions are more relevant in fitting the data? We find that including intermediate inputs is most important, while currency substitution does not seem to play a major role. Moreover, financial frictions and liability dollarization are also relevant.Estimating Models for Monetary Policy Analysis in Emerging CountriesAbstracthttp://www.bcentral.cl/eng/studies/working-papers/561.htmFull texthttp://www.bcentral.cl/eng/studies/working-papers/pdf/dtbc561.pdfJavier García-CiccoJavier García-Cicco2010-03Central Bank of Chile Working Papers