Chile: Selected Issues Paper

International Monetary Fund

No 2008/239, IMF Staff Country Reports from International Monetary Fund

Abstract: This Selected Issues paper examines the acceleration of inflation over the past year in Chile, identifying domestic shocks to food and energy prices as main drivers. The paper uses the Jeanne-Rancière model to calculate Chile’s optimal ratio of international reserves to GDP. It analyzes the stabilization properties of Chile’s macroeconomic framework and compares it with alternative policy rules. The paper concludes that Chile’s framework based on an explicit inflation target, a floating exchange rate, and a structural fiscal surplus rule is superior to other arrangements.

Keywords: ISCR; CR; inflation expectation; fuel inflation--weight; PPI inflation; targeted level; reserve-to-GDP ratio; Inflation; International liquidity; Inflation targeting; Reserve assets; Sudden stops; Global; East Asia (search for similar items in EconPapers)
Pages: 25
Date: 2008-07-23
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