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Credibility and Inflation Targeting in an Emerging Market: The Case of Chile

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  • Luis F. Céspedes
  • Claudio Soto

Abstract

When the monetary authority lacks credibility it faces a larger trade-off between output and inflation. This poses important challenges for the implementation and design of an inflation targeting regime and an inflation stabilization process. In this paper we show how these challenges have determined different implementation phases of an inflation targeting regime in Chile, and how imperfect credibility is consistent with the different features of the disinflationary process followed by Chile during the 90s.

Suggested Citation

  • Luis F. Céspedes & Claudio Soto, 2005. "Credibility and Inflation Targeting in an Emerging Market: The Case of Chile," Working Papers Central Bank of Chile 312, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:312
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    Cited by:

    1. Kose, M. Ayhan & Matsuoka, Hideaki & Panizza, Ugo & Vorisek, Dana, 2019. "Inflation Expectations: Review and Evidence," CEPR Discussion Papers 13601, C.E.P.R. Discussion Papers.
    2. Serge Jeanneau & Camilo E Tovar, 2008. "Domestic securities markets and monetary policy in Latin America: overview and implications," BIS Papers chapters, in: Bank for International Settlements (ed.), New financing trends in Latin America: a bumpy road towards stability, volume 36, pages 140-163, Bank for International Settlements.
    3. Luis Eduardo Arango & Andrés González & John Jairo León & Luis Fernando Melo., 2008. "Cambios de la Tasa de Política y su Efecto en la Estructura a Plazo de Colombia," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 45(132), pages 257-291.
    4. Luis Felipe Céspedes, 2005. "On the Choice and Consequences of Exchange Rate Regimes," International Finance, Wiley Blackwell, vol. 8(1), pages 151-166, March.
    5. Michael Bordo & Pierre Siklos, 2014. "Central Bank Credibility, Reputation and Inflation Targeting in Historical Perspective," NBER Working Papers 20693, National Bureau of Economic Research, Inc.
    6. Felipe Santos Tostes & Helder Ferreira De Mendonça, 2016. "Credibility On Pass-Through In Brazil," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 022, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    7. Martha L�pez, 2006. "Algunos Criterios Para Evaluar Una Meta De Inflaci�N De Largo Plazo," Borradores de Economia 1967, Banco de la Republica.
    8. Arend, Mario, 2005. "Efectos de una nueva medida de shock monetario bajo el esquema de metas de inflación en Chile [Effects of a New Measure of Monetary Shock Under Inflation Targeting in Chile]," MPRA Paper 27156, University Library of Munich, Germany.
    9. Luis Felipe Céspedes C. & Rodrigo Valdés P., 2006. "Central Bank Autonomy: the Chilean Experience," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 9(1), pages 25-47, April.
    10. Francisco J. S. Rocha & Marcos R. V. Magalhaes & Ã tila Amaral Brilhante, 2022. "A BVAR Analysis on Channels of Monetary Policy Transmission in Brazil," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(3), pages 1-19, February.
    11. García-Solanes, José & Torrejón-Flores, Fernando, 2010. "Devaluation and pass-through in indebted and risky economies," International Review of Economics & Finance, Elsevier, vol. 19(1), pages 36-45, January.
    12. Helder Mendonça & Felipe Tostes, 2015. "The Effect of Monetary and Fiscal Credibility on Exchange Rate Pass-Through in an Emerging Economy," Open Economies Review, Springer, vol. 26(4), pages 787-816, September.
    13. Luis Felipe Céspedes & Rodrigo Valdés, 2006. "Autonomía de Bancos Centrales: La Experiencia Chilena," Working Papers Central Bank of Chile 358, Central Bank of Chile.
    14. Martha López, 2006. "Algunos criterios para evaluar una meta de inflación de largo plazo," Borradores de Economia 386, Banco de la Republica de Colombia.

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