Asymmetric Monetary Policy Rules and the Achievement of the Inflation Target: The Case of Chile

The purpose of this paper is to test empirically whether the Central Bank of Chile (CBC) has a monetary policy reaction that changes depending on the actual state of the economy. For that, we estimate a threshold model for the CBC’s policy rule that allows the existence of two policy regimes according to whether the output gap, the inflation deviation or the GDP growth is above or below a threshold value. Also, we assess the possible effects of estimated monetary policy rules in the achievement of the inflation target by simulating a standard New Keynesian Model with endogenous switching parameters. Estimations show that the monetary authority responds strongly to inflation deviations but weakly to the output gap when the gap is larger than a specific threshold value. Furthermore, there is statistical evidence that the CBC reacts faster moving the interest rate under expansion periods. These results are robust when assuming an unknown threshold value and to real-time estimation. Simulations revealthat the estimated monetary policy rule may induce an asymmetric behavior in the inflation rate and a small negative inflation bias.

Estimating the Chilean Natural Rate of Interest

In this paper we use a set of methods to estimate the neutral interest rate for Chile (NRIR). We group the methods into three categories: methods derived from pure economic theory, the NRIR implicit in the price of financial assets, and the rate estimated from a statistical model using macroeconomic data. We learnt that the neutral interest rate is not a time invariant variable. It is closely related to the potential growth of the economy (but it is not equal to the growth rate of the trended output). The application of all methods yields very similar results. The NRIR would be in a range between 2% and 3.6%, with a median equal to 2.8% with data up to the fourth quarter of 2006

Estimating the Output Gap for Chile

In this paper we estimate the output gap and the growth rate of potential output in Chile for the 1986-2005 period, using three different methods: (i) a production function approach, (ii) a Kalman filter approach (univariate and multivariate), and (iii) a structural vector autoregression (SVAR). A high degree of consistency was found among all measures in terms of the sign of the output gap. According to all methods, economic overheating is observed at the beginning of the sample; from 1993 until the Asian Crisis the gap is not very large but is always positive, after the Asian Crisis the gap measures show a smooth tendency to a level close to zero. In order to compare the output gaps generated under the different methodologies, we evaluate the real-time performance of the output gap measures and measure how well the output gap can help forecast future inflation. Regarding the potential output growth, the methods yield broadly similar estimations. Over the complete sample, the average potential growth rate is around 5.6%. However, there seems to be important differences across sub-periods, particularly the growth rate is below the average in the period after the 1999 recession.

Trimmed Indexes as Measures of Trend Imacec

The aim of this work is to elaborate a variety of indexes of economic activity tendency from the original disaggregated series that compose the monthly index of economic activity, Imacec. Following similar statistical techniques to the ones used to elaborate core inflation series, it is hoped that the treatment of the information in the economic sector series will be useful to create easy to understand and calculate in real time indexes that allow opportune evaluation of trend economic activity, according to the ex post Imacec releases. Monitoring the smoothed indexes that exclude the five most volatile sectors of the general index, the one that excludes the extreme 5 percent of the monthly variations, and the one associated to the first principal component of the 12-month variation of the disaggregated sectors may be useful to diagnose the actual impulse of economic activity. Each of these indexes has better performance than the alternative benchmark series and has relevant information about the future path of the actual Imacec.

Explaining the condom use of heterosexual men in a high-income country: adding somatic culture to the theory of planned behaviour

Against the background of an upward trend in newly diagnosed HIV infections and the increasing importance of heterosexual HIV transmission in Europe and Switzerland, the theory of planned behaviour has been tested and extended in a prospective study on condom use in a community sample of heterosexual men. Nine hundred eighty-two Swiss men between the ages of 25 and 65 were surveyed using standardised questionnaires in two computer-assisted telephone interviews. The theory of planned behaviour proved to be able to predict condom use in sexual encounters with new and casual partners. Condom use was predicted by intention. Perceived behavioural control and attitude were significant predictors of intention, whereas the subjective norm was not. Thus, in line with other studies, the present study highlighted the somewhat limited explanatory power of the theory. By adding the socio-cultural variable "somatic culture” to the model, the proportion of explained variance of intention was increased from 36 to 45 per cent. In light of these findings, prevention efforts should be more differentiated and specific in order to meet the specificities of the different types of somatic culture of the men they are targetin

Multiple Coulomb Scattering in Thin Silicon

We present a measurement of multiple Coulomb scattering of 1 to 6 GeV/c electrons in thin (50-140 um) silicon targets. The data were obtained with the EUDET telescope Aconite at DESY and are compared to parametrisations as used in the Geant4 software package. We find good agreement between data and simulation in the scattering distribution width but large deviations in the shape of the distribution. In order to achieve a better description of the shape, a new scattering model based on a Student's t distribution is developed and compared to the data.Comment: 13 pages, 9 figure

The Monetary Policy Horizon in Chile and Other Inflation-Targeting Countries

Tolerating some volatility in the rate of inflation leads the design of inflation target characteristics—in inflation-targeting economies—to reflect flexibility in four dimensions, namely: the price index that defines the target, the width of the target range, the midpoint of the monetary policy horizon (MPH) and the time range of the MPH. This paper evaluates Chile’s MPH—recently redefined by the Central Bank of Chile—in light of the Chilean experience and in an international comparison with other inflation targeters around the world. We review analytical and practical aspects of the formulation of the inflation-targeting framework. Then we present descriptive information on inflation, its volatility and its deviation from the target for all inflation-targeting countries, in order to infer the actual degree of tolerance countries have had toward inflation rates’ deviation and volatility. Next we describe the current design of monetary policy in the four aforesaid dimensions of flexibility in inflation-targeting countries. Finally, we review inflation forecasts published by the Central Bank of Chile and evaluate the consistency between the announced MPH and the Bank’s actual policy horizon.

The Neutral Interest Rate: Estimates for Chile

To estimate the neutral real interest rate for Chile, we use a variety of methods that can be classified into three categories: those derived from economic theory, the neutral rate implicit in financial assets, and statistical procedures using macroeconomic data. We conclude that the neutral rate is not constant over time, but it is closely related with—though not equivalent to—the potential GDP growth rate. The application of the different methods yields fairly similar results. The neutral real interest rate for Chile seems to be in the range from 2.1% to 3.5%, with a median of 2.8% taking data of the fourth quarter of 2007.

The Monetary Policy Horizon in Chile and Other Inflation-Targeting Countries

Tolerating some volatility in the rate of inflation leads the design of inflation target characteristics—in inflation-targeting economies—to reflect flexibility in four dimensions, namely: the price index that defines the target, the width of the target range, the midpoint of the monetary policy horizon (MPH) and the time range of the MPH. This paper evaluates Chile’s MPH—recently redefined by the Central Bank of Chile—in light of the Chilean experience and in an international comparison with other inflation targeters around the world. We review analytical and practical aspects of the formulation of the inflation-targeting framework. Then we present descriptive information on inflation, its volatility and its deviation from the target for all inflation-targeting countries, in order to infer the actual degree of tolerance countries have had toward inflation rates’ deviation and volatility. Next we describe the current design of monetary policy in the four aforesaid dimensions of flexibility in inflation-targeting countries. Finally, we review inflation forecasts published by the Central Bank of Chile and evaluate the consistency between the announced MPH and the Bank’s actual policy horizon