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Current Account and Transitory Deviations of Terms of Trade and Export Volumes: Chile 1985-1999

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  • Jaime Guajardo M.
  • Guillermo Le Fort V.

Abstract

To limit the risks of a sudden stop in external financing that would jeopardize intertemporal consumption smoothing, the current account deficit should be limited to sustainable levels. However, the volatility of the terms of trade and some export volumes cause difficulties in assessing a sustainable current account level. This paper provides a “trend indicator” for the current account based on “normalized” external prices and export volumes. Thus the exercise allows evaluating, in a simple and timely fashion, whether the deficit level is sustainable and, if not, demand adjustment measures are needed to correct it.

Suggested Citation

  • Jaime Guajardo M. & Guillermo Le Fort V., 1999. "Current Account and Transitory Deviations of Terms of Trade and Export Volumes: Chile 1985-1999," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 2(3), pages 005-026, December.
    • Handle: RePEc:chb:bcchec:v:2:y:1999:i:3:p:005-026
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