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 Chilean microeconomic data of stock-market traded firms, this paper analyzes the importance of cash flows in firms investment decisions. Contrary to what the classical theory predicts -only projects profitability matters for investment decisions- a

Using Chilean microeconomic data of stock-market traded firms, this paper analyzes the importance of liquidity (cash flow) in firm's investment decisions. Contrary to what the classical theory predicts -only projects profitability matters for investment decisions- and in line with modem...

Financial frictions have been used to enrich mechanisms transmission in macroeconomics. However, the predictions of real business cycle models of costly external finance imply a procyclical default rate, external premium and relative price of capital which seems at odds with the data. In this...

This paper evaluates the performance of simple monetary policy rules in a calibrated model for the Chilean economy. The monetary regimes considered are: exchange rate peg, money peg, inflation targeting, nontradable inflation targeting, and a Taylor rule. We develop a small open economy model...

This paper uses an open economy DSGE model with a commodity sector and nominal and real rigidities to ask what factors account for current account developments in two small commodity exporting countries. We estimate the model, using Bayesian techniques, on Chilean and on New Zealand data, and...

This paper explores some of the channels through which the terms of trade influence the labor market in an emerging economy like Chile. To do so, we analyze the cyclical properties of labor variables using an autoregressive vector to estimate the responses of the labor market to a terms of trade...

Financial frictions have been shown to play an important role amplifying business cycles fluctuations. In this paper we show that the financial accelerator mechanism, analyzed by Bernanke, Gertler and Gilrchrist (1999), combined with adaptive learning can amplify business cycle fluctuations...