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A caricature (model) of the world economy
This paper provides an extremely stylized model of the workings of a global economy where one of its key driving factors is economic agents’ continuous struggle to find assets to park financial resources. This struggle naturally comes with euphoria and disappointments as many of the 'parking lots' are ...
Resource revenue management: three policy clocks
Economies in which the extraction of a non-renewable natural resource is a significant activity pose two distinctive challenges for economic policy: Revenues are likely to fluctuate because commodity prices have historically been volatile. Furthermore the revenue from extraction is generated by depleting ...
Terms of trade shocks and investment in commodity-exporting economies
Commodity prices have experienced significant swings over the past two decades. Real commodity prices have on average more than doubled in the last decade compared to the previous one while the prices of some commodities such as copper and other industrial metals have more than tripled in real terms. ...
Financial reforms and capital flows: insights from general equilibrium
How are capital flows affected by financial reforms that relax credit constraints and raise the ability of domestic firms to borrow? At first glimpse one might be tempted to dismiss the question as trivial. If some domestic firms are credit constrained (which we assume to be the case!) relaxing their ...
Non-ricardian aspects of fiscal policy in Chile
In this paper we examine the effects of government spending shocks in the Chilean economy. The study of the effects of such shocks in an emerging market economy is of special interest because of the potential presence of non-Ricardian households that is households that do not own any assets or have ...
A solution to fiscal procyclicality: the structural budget institutions pioneered by Chile
In June 2008 the President of Chile Michelle Bachelet had a low approval rating for management of the economy in particular. There were undoubtedly multiple reasons for this but a major reason was popular resentment that the government had resisted intense pressure to spend soaring receipts from copper ...
Anchors aweigh: how fiscal policy can undermine 'good' monetary policy
Policymakers have long understood that if fiscal policy runs amuck and monetary policy is forced to raise seigniorage revenues big inflations result. Latin American policymakers understand this outcome better than most. This message is implicit in Cagan’s (1956) initial study of hyperinflation and the ...
Chile’s fiscal rule as social insurance
Well before the Great Recession of 2009 put fiscal policy debates in the front burner commodity-exporting countries had to deal with important fiscal policy dilemmas stemming from revenue volatility and eventual depletion. Chilean policymakers have been at the forefront in this area since adopting a ...
Economic policies in emerging-market economies: an overview
Economic policies in emerging-market economies (EMEs) are shaped by the structural features and policy challenges of countries on their road to development. Convergence toward income levels of advanced countries is a difficult and bumpy road—it is even uncertain if and when most developing countries ...
Endogenous exchange-rate pass-through and self-validating exchange rate regimes
A long-standing question in open macroeconomics concerns the choice of currency denomination of nominal prices and contracts. A firm serving the export market may choose to set prices in its domestic currency in the currency of the market of destination or in a vehicle currency possibly indexing these ...