Journal Economía Chilena (The Chilean Economy)

Articles
Eighty Years of History of the Central Bank of Chile Vittorio Corbo L. / Leonardo Hernández T. The Central Bank of Chile was founded in 1925, to provide the country with an institution that could stabilize the currency, regulate interest and discount rates, and avoid disruptions in the country’s financial, industrial and economic development (Decree Law Nº486, August 22, 1925). But a weak institutional framework meant that the Bank, far from ameliorating these problems, aggravated them, leading to decades of high and persistent inflation. Inflation became under control only during the past decade, after a new law enacted in 1989 granted the Central Bank with full independence, allowing it to implement an Inflation Targeting Monetary Policy Regime. In achieving this result were also fundamental the fiscal stability and the building of a robust financial sector, both attained since the mid 1980s. This paper reviews the history of the Central Bank of Chile since its early days, putting its changes in the appropriate historical context.
Fear of Floating and Exchange Rate Policy in Chile José De Gregorio R. / Andrea Tokman R. The paper reviews the exchange rate management experience in Chile, with particular emphasis on the floating exchange rate regime implemented in 1999 and its two forex intervention episodes. It presents evidence on Chile’s favorable conditions to deal with exchange rate shocks: a well-developed financial sector, that offers hedging opportunities taken up by the corporate sector to decrease its vulnerability through balance sheet effects; and a low and decreasing level of passthrough from the exchange rate to prices. These elements contribute to diminish the costs of the floating exchange rate regime, reducing its implied financial and price instability threat, and therefore avoiding fear of floating. Moreover, it provides enough credibility to the current exchange rate system, reinforcing the commitment to making interventions a rare event.
Denomination of the Debt of the Chilean Government: A Risk Management Perspective Elías Albagli I. This paper proposes a framework to assess the convenience of the current public debt denomination of the Chilean Government, through its implications on fiscal budget risk management. A “Value at Risk” methodology is proposed to compare alternative denominations regarding currency and interest rate. This methodology computes the implicit volatility of the budget’s result considering both the variance of individual accounts, as well as their respective covariance, and permits to compare quantitatively the relative risk of different debt denominations. The exercise suggests that changing the current debt denomination in fixed interest payments to variable payments indexed to Libor or government bond rates would significantly reduce the volatility of fiscal results. If more recent correlations are considered in the exercise, the results also suggest reducing current currency denomination in US dollars towards a stronger position in euros. An additional analysis that considers the volatility of estimated correlations, however, recommends taking previous conclusions with caution.
Research Notes
Actividad del Mercado Cambiario y Movimiento del Tipo de Cambio Nominal Jorge Selaive C.
Estimación de Ecuaciones Trimestrales de Variación de Existencias William Baeza L. / Rodrigo Caputo G.
Books review
"Reforming Latin America’s Economies: After the Washington Consensus" de Ricardo Ffrench-Davis Carlos Massad A." Keeping the Promise of Social Security in Latin America" de Indermit Gill, Truman Packard y Juan Yermo "Old Age Income Support in the 21st Century" de Robert Holzmann y Richard Hinz Francisco Rosende R. Solange Berstein J.
Publications Review
Catastro de publicaciones recientes y resúmenes de artículos seleccionados

Eighty Years of History of the Central Bank of Chile
Vittorio Corbo L. / Leonardo Hernández T.

The Central Bank of Chile was founded in 1925, to provide the country with an institution that could stabilize the currency, regulate interest and discount rates, and avoid disruptions in the country’s financial, industrial and economic development (Decree Law Nº486, August 22, 1925). But a weak institutional framework meant that the Bank, far from ameliorating these problems, aggravated them, leading to decades of high and persistent inflation. Inflation became under control only during the past decade, after a new law enacted in 1989 granted the Central Bank with full independence, allowing it to implement an Inflation Targeting Monetary Policy Regime. In achieving this result were also fundamental the fiscal stability and the building of a robust financial sector, both attained since the mid 1980s. This paper reviews the history of the Central Bank of Chile since its early days, putting its changes in the appropriate historical context.

Fear of Floating and Exchange Rate Policy in Chile
José De Gregorio R. / Andrea Tokman R.

The paper reviews the exchange rate management experience in Chile, with particular emphasis on the floating exchange rate regime implemented in 1999 and its two forex intervention episodes. It presents evidence on Chile’s favorable conditions to deal with exchange rate shocks: a well-developed financial sector, that offers hedging opportunities taken up by the corporate sector to decrease its vulnerability through balance sheet effects; and a low and decreasing level of passthrough from the exchange rate to prices. These elements contribute to diminish the costs of the floating exchange rate regime, reducing its implied financial and price instability threat, and therefore avoiding fear of floating. Moreover, it provides enough credibility to the current exchange rate system, reinforcing the commitment to making interventions a rare event.

Denomination of the Debt of the Chilean Government: A Risk Management Perspective
Elías Albagli I.

This paper proposes a framework to assess the convenience of the current public debt denomination of the Chilean Government, through its implications on fiscal budget risk management. A “Value at Risk” methodology is proposed to compare alternative denominations regarding currency and interest rate. This methodology computes the implicit volatility of the budget’s result considering both the variance of individual accounts, as well as their respective covariance, and permits to compare quantitatively the relative risk of different debt denominations. The exercise suggests that changing the current debt denomination in fixed interest payments to variable payments indexed to Libor or government bond rates would significantly reduce the volatility of fiscal results. If more recent correlations are considered in the exercise, the results also suggest reducing current currency denomination in US dollars towards a stronger position in euros. An additional analysis that considers the volatility of estimated correlations, however, recommends taking previous conclusions with caution.

Research Notes

Actividad del Mercado Cambiario y Movimiento del Tipo de Cambio Nominal
Jorge Selaive C.

Estimación de Ecuaciones Trimestrales de Variación de Existencias
William Baeza L. / Rodrigo Caputo G.

"Reforming Latin America’s Economies: After the Washington Consensus" de Ricardo Ffrench-Davis
Carlos Massad A."
Keeping the Promise of Social Security in Latin America" de Indermit Gill, Truman Packard y Juan Yermo "Old Age Income Support in the 21st Century" de Robert Holzmann y Richard Hinz Francisco Rosende R.
Solange Berstein J.

Publications Review

Catastro de publicaciones recientes y resúmenes de artículos seleccionados

Banco Central de Chile

Revista Economía Chilena

Published Issues