IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/43076.html
   My bibliography  Save this paper

Tipo de Cambio Real en Chile: Dinámica, Tendencia y Equilibrio
[Real Exchange Rate in Chile: Dynamics, Trend and Equilibrium]

Author

Listed:
  • Miranda, Jorge

Abstract

The Real Exchange Rate (RER) dynamic has been widely studied. The international literature shows that, in the period after the Bretton Woods treaties, it would follow a non-stationary process. The evidence for the Chilean economy suggests that only in the very long term it is possible to find evidence in favor of the PPP hypothesis. The main causes of these deviations from the law of a unique price would be short term nominal rigidities, transformations in the exchange rate regime and structural breaks in the real exchange rate. These deviations could impact the calculation of the equilibrium RER, and therefore the understanding of the RER dynamic becomes of particular relevance in terms of economic policy. This paper studies the RER dynamic, finding evidence of a potential structural break in its trajectory between the years 1998 and 1999. The cause of the break would be related to the implementation of the Flexible Exchange Rate Regime and Inflation Targeting. This finding supports the Quasi PPP hypothesis coined by Hegwood and Papell (1998), in which the RER would revert to a long term mean that is variable in time. Finally, through the resolution of a DSGE model estimated for Chile, we propose an alternative methodology for the calculation of the equilibrium RER.

Suggested Citation

  • Miranda, Jorge, 2012. "Tipo de Cambio Real en Chile: Dinámica, Tendencia y Equilibrio
    [Real Exchange Rate in Chile: Dynamics, Trend and Equilibrium]
    ," MPRA Paper 43076, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:43076
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/43076/1/MPRA_paper_43076.pdf
    File Function: original version
    Download Restriction: no

    File URL: https://mpra.ub.uni-muenchen.de/60335/1/MPRA_paper_60335.pdf
    File Function: revised version
    Download Restriction: no

    References listed on IDEAS

    as
    1. César Calderón & Roberto Duncan, 2003. "Purchasing power parity in an emerging market economy: a long- span study for Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 30(1 Year 20), pages 103-132, June.
    2. Schmitt-Grohe, Stephanie & Uribe, Martin, 2003. "Closing small open economy models," Journal of International Economics, Elsevier, vol. 61(1), pages 163-185, October.
    3. Paul Cashin & C. John McDermott, 2006. "Parity Reversion in Real Exchange Rates: Fast, Slow, or Not at All?," IMF Staff Papers, Palgrave Macmillan, vol. 53(1), pages 1-5.
    4. Juan Pablo Medina & Claudio Soto, 2007. "Copper Price, Fiscal Policu and Business Cycle in Chile," Working Papers Central Bank of Chile 458, Central Bank of Chile.
    5. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    6. Rodrigo Caputo G. & Marco Núñez N. & Rodrigo Valdés P., 2008. "Análisis del tipo de cambio en la práctica," Investigación Conjunta-Joint Research,in: Centro de Estudios Monetarios Latinoamericanos (CEMLA) (ed.), Estimación y Uso de Variables no Observables en la Región, edition 1, volume 1, chapter 11, pages 313-364 Centro de Estudios Monetarios Latinoamericanos, CEMLA.
    7. Alvaro Aguirre & César Calderón, 2005. "Real Exchange Rate Misalignments and Economic Performance," Working Papers Central Bank of Chile 316, Central Bank of Chile.
    8. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    9. Patricio Arrau & Jorge Quiroz & Rómulo Chumacero, 1992. "Ahorro Fiscal y Tipo de Cambio Real," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 29(88), pages 349-386.
    10. Perron, Pierre & Rodriguez, Gabriel, 2003. "GLS detrending, efficient unit root tests and structural change," Journal of Econometrics, Elsevier, vol. 115(1), pages 1-27, July.
    11. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 624-660, June.
    12. Rómulo Chumacero Escudero, 2000. "Se busca una raíz unitaria: evidencia para Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 27(1 Year 20), pages 55-68, June.
    13. Rómulo A. Chumacero & Rodrigo Fuentes & Klaus Schmidt-Hebbel, 2004. "Chile’s Free Trade Agreements: How Big is The Deal?," Working Papers Central Bank of Chile 264, Central Bank of Chile.
    14. Rómulo A. Chumacero, 2005. "A Toolkit for Analyzing Alternative Policies in the Chilean Economy," Central Banking, Analysis, and Economic Policies Book Series,in: Rómulo A. Chumacero & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.), General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 8, pages 261-302 Central Bank of Chile.
    15. Matías Tapia & Andrea Tokman, 2003. "Efectos de las intervenciones en el mercado cambiario: el caso de Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 30(1 Year 20), pages 21-53, June.
    16. Rodrigo Caputo G. & Bernardo Dominichetti H., 2005. "Revisión Metodológica en el Cálculo del IPE e Implicancias sobre los Modelos de Serie de Tiempo Para el TCR," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 8(1), pages 77-82, April.
    17. Hegwood, Natalie D & Papell, David H, 1998. "Quasi Purchasing Power Parity," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 3(4), pages 279-289, October.
    18. Gourieroux, C & Monfort, A & Renault, E, 1993. "Indirect Inference," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages 85-118, Suppl. De.
    19. Lothian, James R & Taylor, Mark P, 1996. "Real Exchange Rate Behavior: The Recent Float from the Perspective of the Past Two Centuries," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 488-509, June.
    20. José De Gregorio & Andrea Tokman & Rodrigo Valdés, 2005. "Flexible Exchange Rate with Inflation Targeting in Chile: Experience and Issues," Research Department Publications 4427, Inter-American Development Bank, Research Department.
    21. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164.
    22. Rómulo A.Chumacero & J.Rodrigo Fuentes, 2006. "Economic growth in Latin America: structural breaks or fundamentals," Estudios de Economia, University of Chile, Department of Economics, vol. 33(2 Year 20), pages 141-154, December.
    23. Chumacero, Romulo A. & Fuentes, J. Rodrigo, 2006. "Chilean growth dynamics," Economic Modelling, Elsevier, vol. 23(2), pages 197-214, March.
    24. Fernando Lefort & Eduardo Walker, 1999. "El Dólar Como Activo Financiero: Teoría y Evidencia Chilena," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 36(109), pages 1035-1066.
    25. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    26. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    real exchange rate; structural change; DSGE model; Equilibrium real exchange rate;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:43076. 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: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.