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Explaining inflation and output volatility in Chile: an empirical analysis of forty years

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  • Juan de Dios Tena

    ()

  • César Salazar

    ()

Abstract

We present a data oriented analysis of the effect of different kind of economic shocks on Chilean output growth and inflation over the last 40 years. Two important results are: (1) foreign shocks only explain 17% of the variability of the output growth in the period 1984-2006 whereas it used to account for the 47,2% of output variability in 1966-1983; (2) The participation of foreign shocks to explain the Chilean inflation reaction becomes more importan in the last twienty years because of the price liberalization and Chile's openness to international trade. Results highlight specific features of the Chilean economy not present in other countries.

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File URL: http://www.fce.unal.edu.co/media/files/documentos/Cuadernos/49/v27n49a10.pdf
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Article provided by UN - RCE - CID in its journal REVISTA CUADERNOS DE ECONOMÍA.

Volume (Year): (2008)
Issue (Month): ()
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Handle: RePEc:col:000093:005373

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Keywords: apertura comercial; volatilidad; inflación; crecimiento; VAR estructural;

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  1. Bejan, Maria, 2006. "Trade Openness and Output Volatility," MPRA Paper 2759, University Library of Munich, Germany.
  2. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2004. "Growth Volatility and Financial Liberalization," NBER Working Papers 10560, National Bureau of Economic Research, Inc.
  3. Kristin J. Forbes, 2001. "Are Trade Linkages Important Determinants of Country Vulnerability to Crises?," NBER Working Papers 8194, National Bureau of Economic Research, Inc.
  4. Theo Eicher & Leslie Hull, 2001. "Financial liberalization, openness and convergence," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 13(4), pages 443-459.
  5. Peter M. Summers, 2005. "What caused the Great Moderation? : some cross-country evidence," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-32.
  6. Juselius, Katarina & Toro, Juan, 2005. "Monetary transmission mechanisms in Spain: The effect of monetization, financial deregulation, and the EMS," Journal of International Money and Finance, Elsevier, vol. 24(3), pages 509-531, April.
  7. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
  8. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1987. "Stochastic Trends and Economic Fluctuations," NBER Working Papers 2229, National Bureau of Economic Research, Inc.
  9. Spencer Dale & Andrew Haldane, 1993. "Interest rates and the channels of monetary transmission: some sectoral estimates," Bank of England working papers 18, Bank of England.
  10. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  11. Sylvain Leduc & Keith Sill, 2007. "Monetary Policy, Oil Shocks, and TFP: Accounting for the Decline in U.S. Volatility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 595-614, October.
  12. Calderon, Cesar & Loayza, Norman & Schmidt-Hebbel, Klaus, 2005. "Does openness imply greater exposure ?," Policy Research Working Paper Series 3733, The World Bank.
  13. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
  14. Lutkepohl, Helmut & Reimers, Hans-Eggert, 1992. "Impulse response analysis of cointegrated systems," Journal of Economic Dynamics and Control, Elsevier, vol. 16(1), pages 53-78, January.
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Cited by:
  1. Michael Kumhof & Douglas Laxton, 2010. "Chile’s Structural Fiscal Surplus Rule: a Model-Based Evaluation," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 13(3), pages 5-32, December.

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