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Monetary Policy in Chile: a black box?

Author

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  • Angel Cabrera
  • Luis Felipe Lagos

Abstract

This paper studies monetary policy in Chile during the 1986-1997 period. We concentrate in understanding the monetary transmission mechanism by which the Central Bank instrument—the real interest rate—affects total expenditure, output and the inflation rate. The methodology used is structural VARS. We find a weak effect of the interest rate on all the variables. The interest rate has a significant effect on the expenditure-output gap. Both the interest rate and the expenditure-output gap have a significant effect on the price of non-traded goods, in line with the dependent economy model (the Australian model).

Suggested Citation

  • Angel Cabrera & Luis Felipe Lagos, 2000. "Monetary Policy in Chile: a black box?," Working Papers Central Bank of Chile 88, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:88
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    Cited by:

    1. Melike Altinkemer, 2005. "Recent Experiences with Capital Controls : Is There A Lesson for Turkey?," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 5(2), pages 1-38.
    2. Verónica Mies M. & Felipe Morandé L. & Matías Tapia G., 2002. "Monetary Policy and Transmission Mechanisms: New Elements for an old Debate," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 5(3), pages 29-66, December.
    3. Verónica Mies & Felipe Morandé & Matías Tapia, 2002. "Política Monetaria y Mecanismos de Transmisión: Nuevos Elementos para una Vieja Discusión," Working Papers Central Bank of Chile 181, Central Bank of Chile.
    4. Fabián Gredig U. & Klaus Schmidt-Hebbel D. & Rodrigo O. Valdés P., 2008. "The Monetary Policy Horizon in Chile and Other Inflation-Targeting Countries," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(1), pages 5-27, April.
    5. Carlos José García, 2001. "Políticas de Estabilización en Chile Durante los Noventa," Working Papers Central Bank of Chile 132, Central Bank of Chile.
    6. Muhammad Naveed Tahir, 2012. "Relative Importance of Monetary Transmission Channels in Inflation Targeting Emerging Economies," EcoMod2012 4092, EcoMod.

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