Center for Pacific Basin Studies

The Center for Pacific Basin Studies promotes cooperation among central banks in the Pacific Basin and provides insight into and analysis of economic policy issues affecting the region.

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Pacific Basin Notes

Occasional series of the FRBSF Economic Letter

Monetary Policy and Financial Conditions

2024 – 07

| March 4, 2024

Financial conditions indexes summarize a broad range of financial indicators with the goal of measuring how financial markets affect economic activity. Evidence from event studies with high-frequency data supports the view that monetary policy is a key driver of financial conditions. The effects are evident, not only around monetary policy announcements but also, indirectly, around macroeconomic data releases. The impact of inflation surprises on financial conditions has strengthened over the past year, likely due to the perceived implications for the future course of monetary policy.

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Working Papers

A Post-Pandemic New Normal for Interest Rates in Emerging Bond Markets? Evidence from Chile

2024-04 | FEBRUARY 2024

Luis Ceballos, Jens H. E. Christensen, Damian Romero

Before the COVID-19 pandemic, researchers intensely debated the extent of the decline in the steady-state short-term real interest rate—the so-called equilibrium or natural rate of interest. Given the recent sharp increase in interest rates, we revisit this question in an emerging bond market context and offer a Chilean perspective using a dynamic term structure finance model estimated directly on the prices of individual Chilean inflation indexed bonds with adjustments for bond-specific liquidity risk and real term premia. We estimate that the equilibrium real rate in Chile fell about 2 and a half percentage points in the 2003-2022 period and has remained low since then.

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November 16 – November 17, 2023
Federal Reserve Bank of San Francisco | San Francisco, CA


November 18, 2022
Federal Reserve Bank of San Francisco | San Francisco, CA

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