IMF Staff Country Reports

Chile: Selected Issues Paper

Publication Date:

July 23, 2008

Electronic Access:

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Summary:

This Selected Issues paper examines the acceleration of inflation over the past year in Chile, identifying domestic shocks to food and energy prices as main drivers. The paper uses the Jeanne-Rancière model to calculate Chile’s optimal ratio of international reserves to GDP. It analyzes the stabilization properties of Chile’s macroeconomic framework and compares it with alternative policy rules. The paper concludes that Chile’s framework based on an explicit inflation target, a floating exchange rate, and a structural fiscal surplus rule is superior to other arrangements.

Series:

Country Report No. 2008/239

Subject:

Asset and liability management Balance of payments Central banks Inflation Inflation targeting International liquidity Monetary policy Prices Reserve assets Sudden stops