Chile: Selected Issues Paper

Author: International Monetary Fund

Volume/Issue: Volume 2008 Issue 239

Publication date: July 2008

ISBN: 9781451807677

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Banks and Banking , Finance , Inflation , Money and Monetary Policy , Public Finance , 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

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Republic of Congo : 2001 Article IV

Summary

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.