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Políticas de Estabilización en Chile Durante los Noventa

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  • Carlos José García

Abstract

This paper provides econometric evidence on the effectiveness of targeting inflation in order to reduce the rate of inflation in Chile in the 1991-97 period. This paper shows that the inflation target altered the inflationary dynamic, by following through with out–of-sample forecasts with VAR models. Second, this paper estimates the Central Bank’s feedback rule by using a semi-structural VAR, which shows that an unexpected and temporary real interest shock can reduce the inflationary gap. However, this paper argues that the strategy of using unexpected and temporary shocks to explain the decline in inflation is misleading. The paper supports this with consideration to the fact that the inflation target was an announced, decreasing, and permanent policy. Third, by using an unrestricted VAR, this paper performs dynamic solutions that assume an exogenous and known path for the inflation target. The results indicate that the decreasing inflation target gradually led inflation to the single-digit range without a drop in output. However, the real appreciation observed during this period and connected with a capital inflow shock was also an important element to explain the decline in the rate of inflation.

Suggested Citation

  • Carlos José García, 2001. "Políticas de Estabilización en Chile Durante los Noventa," Working Papers Central Bank of Chile 132, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:132
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    8. Ben S. Bernanke & Mark Gertler & Mark Watson, 1997. "Systematic Monetary Policy and the Effects of Oil Price Shocks," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 91-157.
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    11. Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-921, September.
    12. Richard H. Clarida & Mark Gertler, 1997. "How the Bundesbank Conducts Monetary Policy," NBER Chapters,in: Reducing Inflation: Motivation and Strategy, pages 363-412 National Bureau of Economic Research, Inc.
    13. Angel Cabrera & Luis Felipe Lagos, 2000. "Monetary Policy in Chile: a black box?," Working Papers Central Bank of Chile 88, Central Bank of Chile.
    14. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
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