| This paper estimates two small-open-economy structural VAR models for Nicaragua. I use important foreign variables, such as the U.S. federal funds rate, U.S. output, and the world commodity price index, as exogenous in the VAR model. The results suggest that foreign variables play a more important role than domestic monetary policy and other domestic variables in explaining the fluctuations of Nicaragua's output and prices. While I find that the effects of Nicaragua's monetary policy shocks on different macroeconomic variables are consistent with the theoretical predictions, these effects are not highly statistically significant. |
