Monetary Policy at the Zero Lower Bound: The Chilean Experience

Luis Cespedes, Javier García-Cicco and Diego Saravia ()
Authors registered in the RePEc Author Service: Javier Garcia Cicco

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: In this paper we analyze the effects of the Term Liquidity Program (FLAP) implemented by the Central Bank of Chile in response to the financial crisis of 2008-9. We find that the announcement related to this policy significantly reduced nominal yields in the policy horizon of two years. These results suggest that the credibility goal of this unconventional policy (i.e. to convey the message that the monetary policy rate was to remain at its lower bound for a prolonged period of time) was achieved. We also analyze how the usage of that facility by banks affected the credit they supply. We find that banks that borrowed from this facility increase commercial and consumer loans, relative to those that did not, but mortgage credit was not significantly affected. In other words, this additional source of short-term borrowing was used mainly to finance short-term lending.

Date: 2013-12
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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Related works:
Chapter: Monetary Policy at the Zero Lower Bound: The Chilean Experience (2014)
Journal Article: Monetary policy at the zero lower bound: the chilean experience (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:712

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