## Post-Pandemic Changes to Chile’s Financial Markets: Chile

_Selected Issues Papers, February 25, 2025_

## Source details

**Canonical URL:** [Post-Pandemic Changes to Chile’s Financial Markets: Chile](https://www.imf.org/en/publications/selected-issues-papers/issues/2025/02/25/post-pandemic-changes-to-chiles-financial-markets-chile-562679)

## Other formats

- [Markdown version](/en/publications/selected-issues-papers/issues/2025/02/25/post-pandemic-changes-to-chiles-financial-markets-chile-562679/index.md)
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## Bibliographic details
- Authors: Tatsushi Okuda
- Published: February 25, 2025
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798229003124.018

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### Executive summary and key findings
- Pension fund withdrawals, rising public debt, and the Central Bank of Chile’s pandemic liquidity injections have reshaped Chile’s financial landscape.
- Demand for local bonds has diminished, leading large non-financial corporations and the government to rely more on foreign investors.
- Overall, Chile’s financial depth has diminished.
- Markets have become more volatile and more sensitive to shocks.
- Restoring pension funds and continuing to strengthen market resilience and crisis response capabilities are essential for ensuring future financial stability.

### Drivers of change in financial markets
- Pension fund withdrawal: Identified as a primary factor reducing domestic investor demand for local bonds.
- Public debt dynamics: Rising public debt increased issuance needs and altered market composition.
- Central Bank actions: Pandemic liquidity injections by the Central Bank of Chile materially changed market liquidity conditions and balance sheets.

### Market outcomes and risks
- Reduced financial depth: Aggregate measures of financial depth have declined following the pandemic-era developments.
- Greater volatility: Market volatility increased, and sensitivity to external and internal shocks rose.
- Increased foreign reliance: Larger share of financing for large non-financial corporates and sovereign borrowing shifted toward foreign investors.

### Policy recommendations and resilience actions
- Restore pension funds: Rebuilding pension fund assets and domestic investor participation is central to re-deepening local financial markets.
- Strengthen market resilience: Continue efforts to bolster market structures to absorb shocks.
- Enhance crisis response capabilities: Improve tools and frameworks for crisis management to reduce systemic vulnerability.

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## Content in this bundle

- **Sign-Restriction VAR Analysis on Bond Issuance**
  - [Sign-Restriction VAR Analysis on Bond Issuance (Markdown version)](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025012.pdf.md){rel="alternate" type="text/markdown"}
  - [Sign-Restriction VAR Analysis on Bond Issuance (PDF)](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025012.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/selected-issues-papers/issues/2025/02/25/post-pandemic-changes-to-chiles-financial-markets-chile-562679_