Using structural VARs identified with long-run restrictions, this paper evaluates the importance of nominal shocks and real disturbances on the Chilean real exchange rate (RER) during the nineties. Different estimations indicate that nominal disturbances account for about 30% of the variance of...

When the monetary authority lacks credibility it faces a larger trade-off between output and inflation. This poses important challenges for the implementation and design of an inflation targeting regime and an inflation stabilization process. In this paper we show how these challenges have...

The paper presents a general equilibrium model that combines a non-Walrasian labor market with firms setting prices on a staggered basis. The model is utilized to analyze the impact of different shocks on a set of variables under two alternative monetary policy rules. The main characteristic of...

This paper documents the main empirical regularities of the Chilean economy over the last 20 years. In the first place we describe the structure of the economy in terms of the relative size of different sectors, and the importance of different aggregate demand components. In the second place we...

This paper uses an open economy DSGE model with a commodity sector and nominal and real rigidities to ask what factors account for current account developments in two small commodity exporting countries. We estimate the model, using Bayesian techniques, on Chilean and on New Zealand data, and...