The Impact of Monetary Policy on the ASS Countries: Inflation Targeting with Bayesian estimation DSGE

Abstract

This study examines the impact of monetary policy on price stability in the ASS, by analyzing shocks and fluctuations in the business cycle. To do this, we use a DSGE model and quarterly data, applying the Bayesian method. The results obtained through the IRFs reveal that the interest rate transmission channel plays a significant role in the stabilization of prices within the union and the decomposition of the variance shows that the largest share of inflationary volatility (96.54%) is explained by a policy rate shock. Therefore, it would be preferable to act on the policy rate in order to stabilize prices.