Chile: Selected Issues Paper
July 23, 2008
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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.
Subject: Asset and liability management, Balance of payments, Central Banks, Inflation, Inflation targeting, International liquidity, Monetary policy, Prices, Reserve assets, Sudden stops
Keywords: CR, East Asia, fuel inflation--weight, Global, Inflation, inflation expectation, Inflation targeting, International liquidity, ISCR, PPI inflation, Reserve assets, reserve-to-GDP ratio, Sudden stops, targeted level
Pages:
25
Volume:
2008
DOI:
Issue:
239
Series:
Country Report No. 2008/239
Stock No:
1CHLEA2008001
ISBN:
9781451807677
ISSN:
1934-7685
