Conferences

First Monetary Policy Research Workshop in Latin America and the Caribbean

Monetary Policy Response to Supply and Asset Price Shocks

Santiago, Chile, November 17 - 18, 2005

Organised by the Central Bank of Chile and the Centre of Central Banking Studies (CCBS) of The Bank of England

The ongoing oil price shock has put under stress monetary policy in all countries, both oil importers and exporters. Higher oil prices and the related uncertainty about their persistence imposes a challenge to central banks, both because of their direct effects on domestic prices and their indirect effects that take place by affecting activity, domestic spending, and labour markets. The oil price shock serves as vivid reminder that the optimal monetary response to supply shocks – stemming from exchange-rate adjustment, commodity prices or production cost shocks – is still controversial and may depend on the structure of the economy and the credibility of monetary policy.

Something similar can be said about asset price shocks, like the housing price and equity price shocks observed in many economies over the recent past. While in this case the transmission mechanisms to inflation differ significantly from supply shocks, and asset price shocks may also have implications for financial stability, the common theme is that monetary policy response to asset price shocks is not obvious either.

The purpose of this First Monetary Policy Workshop in Latin America and the Caribbean on “Monetary Policy Response to Supply and Asset Price Shocks” is to bring together central bank researchers and staff from Latin America and the Caribbean, as well as from England, Canada, the United States and the European Central Bank of England to discuss recent studies and work in progress on these topics. Discussion of theoretical work on optimal monetary policy, cross-country empirical studies, and country-case research and simulations will shed light on the transmission of supply and asset price shocks to the economy, the monetary policy response that the latter should elicit, and how central banks understand and model these shocks for forecasting inflation and making their decisions.

Program

Organizing Committee:

Mario Blejer (Director of the CCBS, BoE)

Klaus Schmidt-Hebbel (Head of Research, Central Bank of Chile)

Rodrigo Fuentes (Senior Economist, Central Bank of Chile)