Monetary Policy Surprises and the Yield Curve in Chile

Abstract

This paper estimates the impact of a monetary policy shock on the nominal and real yield curve in Chile during the period 2002-2007. Using information from the forward curve to obtain the non anticipated component of the policy action, we find that the effect of a monetary surprise on the nominal yield curve is positive and very significant, while the effect on the real yield curve is positive but numerically lower than the nominal case and not always significant. The response of the yield curves to the anticipated component of the policy change is found to be not significant. We also report that the response of the nominal curve in Chile to a monetary surprise is lower than in the U.S. The results are robust to using information from the Survey of Economic Expectations to obtain an alternative measure of monetary shock.