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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

    ()

  • Cesar 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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Paper provided by Universidad Carlos III, Departamento de Estadística y Econometría in its series Statistics and Econometrics Working Papers with number ws071505.

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Date of creation: Mar 2007
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Handle: RePEc:cte:wsrepe:ws071505

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  1. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1991. "Stochastic trends and economic fluctuations," Working Paper Series, Macroeconomic Issues 91-4, Federal Reserve Bank of Chicago.
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  3. 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.
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  7. Calderon, Cesar & Loayza, Norman & Schmidt-Hebbel, Klaus, 2005. "Does openness imply greater exposure ?," Policy Research Working Paper Series 3733, The World Bank.
  8. 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.
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  11. Kristin J. Forbes, 2002. "Are Trade Linkages Important Determinants of Country Vulnerability to Crises?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 77-132 National Bureau of Economic Research, Inc.
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  14. Bejan, Maria, 2006. "Trade Openness and Output Volatility," MPRA Paper 2759, University Library of Munich, Germany.
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Cited by:
  1. Michael Kumhof; Douglas Laxton, 2010. "Chile’s Structural Fiscal Surplus Rule: a Model – Based Evaluation," Working Papers Central Bank of Chile 602, Central Bank of Chile.

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