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Explaining inflation and output volatility in Chile : an empirical analysis of forty years

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Listed author(s):
  • Salazar, César
  • Tena, Juan de Dios

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 de Madrid. Departamento de Estadística in its series DES - Working Papers. Statistics and Econometrics. WS with number ws071505.

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Date of creation: Mar 2007
Handle: RePEc:cte:wsrepe:ws071505
Contact details of provider: Web page: http://portal.uc3m.es/portal/page/portal/dpto_estadistica

Keywords: Structural VAR models;

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Find related papers by JEL classification:
  • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
  • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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  1. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
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  7. 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.
  8. Calderon, Cesar & Loayza, Norman & Schmidt-Hebbel, Klaus, 2005. "Does openness imply greater exposure ?," Policy Research Working Paper Series 3733, The World Bank.
  9. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
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  13. Peter M. Summers, 2005. "What caused the Great Moderation? : some cross-country evidence," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-32.
  14. 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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Cited by:

  1. Michael Kumhof & Douglas Laxton, 2010. "Chile’s Structural Fiscal Surplus Rule: a Model-Based Evaluation," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 13(3), pages 5-32, December.
  2. Michael Kumhof & Douglas Laxton, 2010. "Chile’s Structural Fiscal Surplus Rule: a Model-Based Evaluation," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 13(3), pages 5-32, December.

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