Description

This article analyses the dynamics of Gross Fixed Capital Formation (GFCF) in Chile through a structural vector autoregression that incorporates an original measure of mining investment constructed using firm-level microdata. In addition to assessing its specific contribution, the model allows for the joint characterisation of the transmission of external and domestic shocks on aggregate investment. The estimates show that mining investment is a relevant determinant of GFCF, although not the only one: shocks associated with the global business and financial cycle, business confidence, uncertainty, and domestic financial conditions generate significant and heterogeneous responses. An increase in investment volatility is also observed from 2018 onwards, consistent with episodes of external and domestic disruption. A historical decomposition indicates that fluctuations in GFCF reflect the changing interaction between global, domestic, and sectoral impulses, highlighting the importance of considering these factors simultaneously in order to understand the recent evolution of investment in Chile. This suggests that its formation is the result of a combination of processes with different dynamics and determinants.