Francisco Rosende () (Instituto de Economía. Pontificia Universidad Católica de Chile.) Roberto Toso
Abstract
The purpose of this paper is to provide an explanation for the very high level of the real interest rate in Chile in the period 1975-1983, in spite of a massive capital inflow in that economy. Like in the fisherian world, the real interest rate is viewed essentially as a real phenomena, so the explanation for its behavior must be found looking the credit market. According to this framework, we stress the role of the structural changes in the Chilean economy initiated in 1973 on the individuals' estimation of their permanent income as a basic determinant of the real interest rate's level. This hypothesis was evaluated empirically using for this purpose time series analysis. The empirical findings tend to show that both the level of the capital inflow as well as the error in the estimation of the permanent income were important determinants of the real interest rate's level in that period.
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Article provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its journal Cuadernos de Economía.
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