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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 ...
Macroeconomic and financial stability: challenges for monetary policy
On September 2008, Lehman Brothers filed for bankruptcy and the world became aware that the financial crisis that had been unfolding for months was far more serious than expected. Months later, it became clear that the financial crisis of 2008-2009 was the worst economic downturn since the Great ...
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 ...
Too poor to grow
Development theorists have long been intrigued by a variety of mechanisms capable of generating vicious cycles of poverty and stagnation—broadly referred to as poverty traps. These mechanisms highlight different ways in which poverty may deter growth and become self-perpetuating. Such situation may ...
Corporate saving in global rebalancing
The increase in global imbalances in the last decade posed a theoretical challenge for international macroeconomics. Why did some less developed countries with a higher need for capital like China lend to richer countries? The inconsistency of standard dynamic open-economy models with actual global ...
Tales of two recessions in Chile: financial frictions in 1999 and 2009
During 2007-2009 the world underwent a deep economic crisis that has been termed the Great Recession where total output is estimated to have decreased 0.6%. This event has had two salient characteristics: it was a financial shock that originated in advanced economies and in the end most of the economies ...