Description

Knowing the frictions that are present in the economy is a key step towards the efficient design of policy actions. In particular, price and wage rigid ities determine the degree of tradeoff between output and inflation stabilization that central banks face. In this context, the main purpose of this paper is to determine the importance of nominal and real rigi dities in the Chilean economy. In doing so, we derive and estimate a dynamic stoc hastic general equilib rium (DSGE) model for the Chilean economy. We find that several rigidities are present in the Ch ilean economy and, in particular, that. the degree of wage stickiness is higher than that of prices. Fu rthermore, imperfect passthrough from exchange rate to import prices is an important feature of the Ch ilean economy. The subsample analysis suggests that some rigidities and policy reactions may have changed. Those chang es maybe related to more a more credible monetary policy.