IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Fear of Floating and Exchange Rate Policy in Chile

  • José De Gregorio R. /
  • Andrea Tokman R.

The paper reviews the exchange rate management experience in Chile, with particular emphasis on the floating exchange rate regime implemented in 1999 and its two forex intervention episodes. It presents evidence on Chile’s favorable conditions to deal with exchange rate shocks: a well-developed financial sector, that offers hedging opportunities taken up by the corporate sector to decrease its vulnerability through balance sheet effects; and a low and decreasing level of passthrough from the exchange rate to prices. These elements contribute to diminish the costs of the floating exchange rate regime, reducing its implied financial and price instability threat, and therefore avoiding fear of floating. Moreover, it provides enough credibility to the current exchange rate system, reinforcing the commitment to making interventions a rare event.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bcentral.cl/estudios/revista-economia/2005/dic/Vol8N3dic2005pp29_54.pdf
Download Restriction: no

Article provided by Central Bank of Chile in its journal Economía Chilena.

Volume (Year): 8 (2005)
Issue (Month): 3 (December)
Pages: 29-54

as
in new window

Handle: RePEc:chb:bcchec:v:8:y:2005:i:3:p:29-54
Contact details of provider: Postal: Casilla No967, Santiago
Phone: (562) 670 2000
Fax: (562) 698 4847
Web page: http://www.bcentral.cl/

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Leitemo, Kai & Soderstrom, Ulf, 2005. "Simple monetary policy rules and exchange rate uncertainty," Journal of International Money and Finance, Elsevier, vol. 24(3), pages 481-507, April.
  2. David-Jan Jansen & Jakob de Haan, 2003. "Statements of ECB Officials and their Effect on the Level and Volatility of the Euro-Dollar Exchange Rate," CESifo Working Paper Series 927, CESifo Group Munich.
  3. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
  4. Ilan Goldfajn & Sergio R.C. Werlang, 2000. "The pass-through from depreciation to inflation : a panel study," Textos para discussão 423, Department of Economics PUC-Rio (Brazil).
  5. Matías Tapia & Andrea Tokman, 2004. "Effects of Foreign Exchange Intervention Under Public Information: the Chilean Case," Working Papers Central Bank of Chile 255, Central Bank of Chile.
  6. Obstfeld, Maurice & Rogoff, Kenneth, 2000. "New directions for stochastic open economy models," Journal of International Economics, Elsevier, vol. 50(1), pages 117-153, February.
  7. Kevin Cowan & Jose De Gregorio, 2005. "International Borrowing, Capital Controls and the Exchange Rate: Lessons from Chile," NBER Working Papers 11382, National Bureau of Economic Research, Inc.
  8. Ricardo Hausmann & Ugo Panizza & Ernesto H. Stein, 2000. "Why Do Countries Float the Way They Float?," IDB Publications (Working Papers) 6467, Inter-American Development Bank.
  9. Hoyt Bleakley & Kevin Cowan, 2008. "Corporate Dollar Debt and Depreciations: Much Ado About Nothing?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 612-626, November.
  10. Joshua Aizenman, 2000. "Endogenous Pricing to Market and Financing Costs," NBER Working Papers 7914, National Bureau of Economic Research, Inc.
  11. Christopher J. Neely, 2000. "The practice of central bank intervention: looking under the hood," Working Papers 2000-028, Federal Reserve Bank of St. Louis.
  12. Kevin Cowan & Erwin Hansen & Luis Oscar Herrera, 2005. "Currency Mismatches, Balance-Sheet Effects and Hedging in Chilean Non-Financial Corporations," Research Department Publications 4387, Inter-American Development Bank, Research Department.
  13. John B. Taylor, 2001. "The Role of the Exchange Rate in Monetary-Policy Rules," American Economic Review, American Economic Association, vol. 91(2), pages 263-267, May.
  14. Svensson, L.E.O., 1998. "Open-Economy Inflation Targeting," Papers 638, Stockholm - International Economic Studies.
  15. Ramana Ramaswamy & Hossein Samiei, 2000. "The Yen-Dollar Rate; Have Interventions Mattered?," IMF Working Papers 00/95, International Monetary Fund.
  16. Dominguez, Kathryn M & Frankel, Jeffrey A, 1993. "Does Foreign-Exchange Intervention Matter? The Portfolio Effect," American Economic Review, American Economic Association, vol. 83(5), pages 1356-69, December.
  17. M. S. Mohanty & Marc Klau, 2004. "Monetary policy rules in emerging market economies: issues and evidence," BIS Working Papers 149, Bank for International Settlements.
  18. Schmidt-Hebbel, Klaus & Tapia, Matias, 2002. "Inflation targeting in Chile," The North American Journal of Economics and Finance, Elsevier, vol. 13(2), pages 125-146, August.
  19. Stephen Chiu, 2002. "Signaling versus Commitment Strengthening: Exchange Rate Insurance against Currency Attacks," Working Papers 202002, Hong Kong Institute for Monetary Research.
  20. Eric Parrado & Andrés Velasco, 2001. "Alternative Monetary Rules in the Open-Economy: a Welfare-Based Approach," Working Papers Central Bank of Chile 129, Central Bank of Chile.
  21. Rasmus Fatum & Michael M. Hutchison, . "Is Foreign Exchange Market Intervention an Alternative to Monetary Policy? Evidence from Japan," EPRU Working Paper Series 02-11, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  22. Felipe Morandé & Matías Tapia, 2002. "Exchange Rate Policy in Chile: From the Band to Floating and Beyond," Working Papers wp192, University of Chile, Department of Economics.
  23. Amartya Lahiri & Carlos A. Végh, 2002. "Living with the Fear of Floating: An Optimal Policy Perspective," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 663-704 National Bureau of Economic Research, Inc.
  24. Choudhri, Ehsan U. & Hakura, Dalia S., 2006. "Exchange rate pass-through to domestic prices: Does the inflationary environment matter?," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 614-639, June.
  25. Esteban Jadresic & Jorge Selaive, 2005. "Is The FX Derivatives Market Effective and Efficient in Reducing Currency Risk?," Working Papers Central Bank of Chile 325, Central Bank of Chile.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:chb:bcchec:v:8:y:2005:i:3:p:29-54. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudio Sepulveda)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.