Identifying Monetary Policy Shocks in an Administered-Rate Economy: Evidence from Peru

Download

• Paper (PDF)

Abstract

Modern identification strategies for monetary policy — sign restrictions, Proxy-SVARs, narrative approaches — rest on assumptions that fail when the interbank rate is administered, no rate-futures market exists, and the monetary record contains too few sharp episodes. These three features, present in Peru and a broad class of emerging-market central banks, render non-recursive identification infeasible. I document this systematically using 85 quarterly observations (2004Q2–2025Q3), comparing seven identification strategies in a single unified framework. Only Cholesky recursive identification survives, and the peak GDP response to a 100 bp hike is −0.195 percentage points. A novel LLM-classified BCRP tone instrument passes relevance but fails exogeneity, a cautionary result for communication-based identification.

Keywords

Monetary Policy, Identification, SVAR, Administered Rates, Emerging Markets, Central Banking, Peru

Citation

Chávez Padilla, Carlos César. 2026. “Identifying Monetary Policy Shocks in an Administered-Rate Economy: Evidence from Peru.” Working paper.