CONFERENCIA * : INTERNATIONAL TRADE AND LABOR INCOME RISK

The Central Bank of Uruguay (BCU) switched to an interest rate instrument for monetary policy in September 2007. This paper develops a Small * Los contenidos expuestos en el siguiente trabajo son de exclusiva responsabilidad del autor. 70 UN MODELO ESTRUCTURAL PEQUENO PARA LA ECONOMIA URUGUAYA Structural Model (MEP) for the Uruguayan economy which contributes to explain the channels through which monetary policy operates under a exible in ation targeting regime. The model is built up in an open economy framework with partial dollarization and quasi-rational expectations. We calibrate the model using quarterly data to show the dynamic response to several structural shocks. The results are consistent with the underlying New Keynesian theory, as well as with previous gures shown in works for countries with similar structural characteristics. Given the small sample size available for time series and the coexistence of several monetary regimes in the sample the empirical results of this model should be considered preliminary. JEL: C15, C51, C60, E12, E17, E52