Comfort in Floating: Taking Stock of Twenty Years of Freely-Floating Exchange Rate in Chile

CEPR Discussion Paper No. DP14967

51 Pages Posted: 23 Jul 2020 Last revised: 16 Aug 2020

See all articles by Elias Albagli

Elias Albagli

University of Southern California - Marshall School of Business; Central Bank of Chile

Mauricio Calani

Central Bank of Chile

Metodij Hadzi-Vaskov

International Monetary Fund (IMF)

Mario Marcel

Central Bank of Chile

Luca A. Ricci

International Monetary Fund (IMF) - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: June 2020

Abstract

Chile offers an example of a country that has overcome the fear of floating by reducing balance sheet mismatches, enhancing financial market development, as well as improving monetary, fiscal, and political institutions, and strengthening policy credibility. Under the floating regime, Chile's economic adjustment to external shocks appears significantly improved, and its exchange rate pass-through has substantially declined. Our results reinforce the case that moving to a clear and credible floating regime can be associated with a reduction in the fear of floating via economic transformation (like smaller balance sheet mismatches, a larger hedging market, and a lower exchange rate pass-through).

Keywords: central bank independence, exchange rate pass-through, Exchange Rate Regime, FX derivatives, Hedging, Policy Credibility

JEL Classification: E31, E52, F31, F33, F41, G15

Suggested Citation

Albagli, Elias and Calani Cadena, Miguel Mauricio and Hadzi-Vaskov, Metodij and Marcel, Mario and Ricci, Luca Antonio, Comfort in Floating: Taking Stock of Twenty Years of Freely-Floating Exchange Rate in Chile (June 2020). CEPR Discussion Paper No. DP14967, Available at SSRN: https://ssrn.com/abstract=3650079

Elias Albagli (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States
56987096932 (Phone)

HOME PAGE: http://www.marshall.usc.edu/faculty/directory/albagli

Central Bank of Chile ( email )

Publicaciones
Huerfanos 1185
Santiago
Chile

Miguel Mauricio Calani Cadena

Central Bank of Chile ( email )

1180 Agustinas St
United States
6702770 (Phone)

Metodij Hadzi-Vaskov

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Mario Marcel

Central Bank of Chile ( email )

Publicaciones
Huerfanos 1185
Santiago
Chile

Luca Antonio Ricci

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6007 (Phone)
202-623-4072 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
125
PlumX Metrics