This paper empirically evaluates the importance of exchange rate regimes and exchange rate volatility on interest rate differentials, with special reference to Chile. We estimate risk-premia for 16 country experiences with different exchange rate regimes and then investigate whether these premia...

In this paper I develop a small open economy model that is characterized by existence of two domestic sectors. Together with a home traded goods sector we incorporate a non-traded goods sector. In both sectors prices are sticky, and each one is subject to a specific productivity shock. In this...

We empirically assess the contribution of international reserves vis- à -vis institutional variables in reducing the risk of a currency crisis. We find that the ratio of reserves to short-term debt is robust in explaining international crisis, even after controlling for financial development...

This article presents an empirical study of the effect of unemployment on aggregate consumption of non-durable goods in Chile (1990-2002). Using an error-correction model, the results show that unemployment lags have a negative and statistically significant sort-run impact on consumption growth....

This paper analyzes boom-bust cycles in emerging market economies triggered by missperception about future productivity. Using a small open economy DSGE model we show that non-materialized news about future productivity improvements (i.e. overoptimism) generate boom-bust cycles that replicate...

Using structural VARs identified with long-run restrictions, this paper evaluates the importance of nominal shocks and real disturbances on the Chilean real exchange rate (RER) during the nineties. Different estimations indicate that nominal disturbances account for about 30% of the variance of...

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...

The paper presents a general equilibrium model that combines a non-Walrasian labor market with firms setting prices on a staggered basis. The model is utilized to analyze the impact of different shocks on a set of variables under two alternative monetary policy rules. The main characteristic of...

This paper documents the main empirical regularities of the Chilean economy over the last 20 years. In the first place we describe the structure of the economy in terms of the relative size of different sectors, and the importance of different aggregate demand components. In the second place we...

This paper characterizes the dynamics of price adjustments in Chile using data at the establishment level of goods in the CPI basket. Our results show that nominal rigidities are lower when measured at micro-level compared to estimates based on macro data. The frequency of price adjustments...