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The Influence of U.S. Monetary Policy Uncertainty and Inflation Expectations on the Economy of Puerto Rico: Insights from a VAR Model

Year: 2025

Type: article

Abstract: This paper investigates the relationship between Puerto Rico’s Headline CPI Inflation Rate, Unemployment Rate, U.S. monetary policy uncertainty, and inflation expectations using a VAR model based on the methodology of Toda and Yamamoto (1995), covering the period 1985–2024. Results reveal bi-directional Granger causality between Puerto Rico’s macroeconomic indicators and U.S. inflation expectations, but not with monetary policy uncertainty. Impulse responses and variance decompositions highlight the significant influence of U.S. inflation expectations on Puerto Rico’s inflation and unemployment. The findings underscore the island’s macroeconomic sensitivity to U.S. expectations.

Source: Zenodo (CERN European Organization for Nuclear Research)

DOI: 10.5281/zenodo.18620875

Author: Romero-Ramírez, Héctor

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W7128741110

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