Banco Central de ChileRevista Economía Chilena
Published Issues
Volumen 2 Nº 1 Abril 1999
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| Monetary Policy and Income Redistribution Jorge Marshall R. The link between monetary policy and equity is reflected directly by the effect of inflation on people’s income and indirectly by economic activity. This article concludes that there is no significant direct relation between inflation and income distribution. However the level of output does significantly affect equity and the extent of poverty. In fact, price stability contributes positively to growth and hence to equity in the long run. Thus the main contribution of monetary policy to equity is by attaining price stability. Nonetheless some short-term policy decisions may have temporary effects on income distribution. |
| On Inflation Determinants and Costs José De Gregorio R. The determinants of inflation, its costs, and how to avoid it are important topics in public discussion and economic analysis, especially in countries with long histories of instability. This paper begins by reviewing the reasons why there is inflation, and then examines its costs. The consequences of adapting economies to live with inflation in order to mitigate its costs are also discussed. Finally, the paper analyzes the costs of stabilization policies and which should be a reasonable objective for long-run inflation. |
| The Chilean Financial Crisis of the Eighties: Analysis of its Solutions and Cost Gonzalo Sanhueza D. This paper reviews the solutions to the Chilean banking crisis of the eighties and analyses their effects, deriving policy lessons from this experience. The three main solutions to the crisis were the following: (i) foreclosure of insolvent institutions or transfer all their assets and liabilities to a solvent institution; (ii) aquisition of high-risk portfolio (bad loans) under condition of repurchase without provision of fresh funds; (iii) aquisition of high-risk portfolio under condition of repurchase through future profits with provision of fresh funds. The results show that the third alternative was the most efficient for the recovery of a significant number of financial institutions with solvency problems. Supporting bank recapitalization and creating incentives for recovering bad loans helped to accelerate the recovery of the banking industry. Also, the paper analzes the precaucions that policy makers should take into account in order to maximize the recovery of resources transferred to the financial system. Finally, the paper reviews estimations of the cost of the crisis, concluding that it would be 35.2% of GDP. |
| Research Notes |
| Revisión de Libros Development Macroeconomics, por Pierre-Richard Agenor y Peter J. Montiel. Patricio Meller Two Lucky People: Memoirs, por Milton y Rose D. Friedman. Claudio Sapelli |
| Publications Review |