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This paper analyzes the impact of the Chile-South Korea Free Trade Agreement (CKFTA) over the bilateral extensive and intensive margins of trade. Using disaggregated product-level data for the period 1996-2017, the paper tests the impact of CKFTA on bilateral flows, as well as differentiate these effects between intensive and extensive margins at the product level. To estimate, a Poisson-Pseudo Maximum Likelihood model is proposed. It is found that the CKFTA had a positive effect over bilateral trade flows, and although new products were added to the bilateral export basket (extensive margin), the impact is stronger on goods already traded (intensive margin). Moreover, the paper concludes that this effect is stronger for Chilean exports. [ABSTRACT FROM AUTHOR]

In this paper, we develop a daily-frequency measure of economic and policy uncertainty for Chile, employing information obtained from Twitter accounts using web scraping techniques and following closely the methodology proposed by Baker et al. (2016). Our proposed measure, called DEPUC, aims to capture the level of general disagreement -a proxy for economic and policy uncertainty-in topics such as the economy, economic policies, uncertainty about particular events, and Chile's conjuncture situation. The index, available from 2012 onwards, shows significant hikes that coincide with several local and international episodes that provoked extraordinary levels of uncertainty in Chile, especially after the events around the civil protests in mid-October 2019 and the start of the COVID-19 pandemic in mid-March 2020. An empirical exercise reveals that the proposed measure is a significant determinant of the nominal exchange rate dynamics, especially when this variable's magnitude is high and a week after the shock occurs. On the contrary, when the exchange rate is low, the impact of uncertainty on this variable is quantitatively smaller for any forecasting horizon. These features, and others discussed in the paper, highlight the usefulness of the proposed metric as an additional indicator that policymakers can incorporate into their monitoring toolkit. [ABSTRACT FROM AUTHOR]

This paper explores the role played by credit unions in financial inclusion in Chile. Using administrative individual-level data, we analyze the borrowing behavior of credit union debtors. The results find that credit unions contribute to financial inclusion: it is more likely that people with low income, elderly, women, and inhabitants of small communities, far from the large urban centers, borrow from credit unions. Also, we find that having a credit union commercial office in the county where individuals live increases their access to credit. [ABSTRACT FROM AUTHOR]

This paper analyzes the effects of the 2014-2015 Chilean tax reform on firms’ valuation and incentives to retain earnings and finance their operations with equity versus debt. By analyzing the effects of the reform on total taxes paid and cash flows received by investors, the paper concludes that in general the reform reduces the value of firms and lessens the incentives to retain earnings. Also, simulations show that the majority of firms would choose the accrual or ‘attributed’ tax based system. However, if the latter is not permitted firms will choose debt over equity. The cash-based or semi-integrated system becomes the preferred option only when tax avoidance is possible. [ABSTRACT FROM AUTHOR]

During the past few years, monetary policy communication has become a hot topic in as far as it seems to have become a very relevant way for central banks to guide markets, beyond actual monetary policy decisions. This paper investigates this issue empirically for the case of Chile. More specifically, using data from 2005 to 2014 and a Component GARCH model, we assess whether changes in the communication of the Central Bank of Chile generates in particular a permanent or temporary change in the volatility of interest rates, after controlling for changes in monetary policy instruments. Our results show that the volatility in interest rate futures in Chile’s swap markets increases following the Central Bank’s communication. However, the impact tends to be temporary instead of permanent and only statistically significant in the pre-crisis period. All in all, our results indicate a reduced relevance of Central Bank's communication for short term swap markets which may reflect that market participants have learned to anticipate changes in monetary policy communication, especially after the global financial crisis. [ABSTRACT FROM AUTHOR]

There are several examples of pelagic fisheries that have experienced fishing collapse when facing downward abundance cycles. Improving understanding about pelagic catch's stock dependence can help avoid new cases of fishing collapse. This paper analyses the possible endogeneity of the fish stock variable in a pelagic fishery harvest function. The harvest function is estimated using panel data and 'El Niño' episodes as instrumental variable for the Chilean jack mackerel biomass. This strategy produces consistent estimates of the fish biomass coefficient. The paper makes two contributions. First, it corrects for endogeneity of the fish stock variable, an issue often underestimated in empirical fishery economics. Secondly, it shows that 'El Niño' episodes have negative effects on the Chilean jack mackerel biomass. [ABSTRACT FROM AUTHOR]

This paper attempts to review the main factors of the yield curve in Chilean market during the period 2005-2013. Two different approaches are used to compute the main three factors denoted as the level, slope and curvature of the yield curve. Then, the impact of economic surprises and announcements are analyzed. Our results indicate that local surprises and announcements (both local and external) have similar effects on the estimated factors under both approaches, whereas is evidenced an asymmetric impact in the case of external surprises. [ABSTRACT FROM AUTHOR]

Chile has experienced tremendous changes over the past centuries. Notwithstanding the importance of many of these transformations, the demographic change has been crucial, given its influence on the whole Chilean society. This paper inquires into the effects of the Chilean demographic transition on the fiscal policies implemented by the government throughout a 150 years period. The results suggest a correlation between demographic variables and fiscal expenditure on different goods. Particularly, the estimations find a positive impact of a younger population on educational expenditure and negative effects of the share of adult population on fiscal expenditures. [ABSTRACT FROM AUTHOR]

In this paper the neoclassical convergence hypothesis is tested for the thirteen regions of Chile using cross-section techniques and the time-series based tests proposed by Bernard, A. and S. Durlauf, 1995, "Convergence in International Output", Journal of Applied Econometrics 10(2), pp. 97-108. Cross-section analysis in combination with a Bayesian Modeling Averaging strategy supports the convergence hypothesis, despite of some instability detected in the estimated speed of convergence. When applying time-series based tests, the no convergence null hypothesis cannot be rejected at the usual significance levels. When clustering the Chilean regions into three different groups, however, evidence of cointegration within these groups is found, indicating that the regional growth process in Chile is driven by a lower number of common trends. [ABSTRACT FROM AUTHOR]

This paper aims to assess the effects of foreign financial shocks on the Chilean economy, for which a model including foreign and domestic series, for both real and financial variables at quarterly frequency is estimated. Among the main results, it is found that Chilean GDP is negatively and significantly affected by shocks in the volatility of foreign stock markets, while the Chilean currency depreciates and the domestic interest rate decreases due to this type of innovations. [ABSTRACT FROM AUTHOR]

In this paper, we study household debt default behavior in Chile using survey data. Previous research in this area suggests financial and personal variables help estimate individual and group probabilities of default. We study mortgage and consumer default separately, as the default decisions and overall borrower behavior are different for each type of debt. Our study finds that income and income-related variables are the only significant and robust variables that explain default for both types of debt. Demographic or personal variables are affected by only one type of debt but not more. For example, the level of education is a factor that affects mortgage default, whereas the determinants of consumer debt default include the age of the household head, and the number of people within the household that contribute to the total family income. We find that the probability of default decreases as the family income increases, and that our estimations are consistent with other studies similar to ours. [ABSTRACT FROM AUTHOR]

In this paper we provide evidence of exchange rate predictability for a selected emerging market economy (EME) at intermediate horizons, arguably, the most relevant for policy purposes. This is important because the existing literature on exchange rate predictability has mainly focused on developed economies, leaving relatively unexplored the question for EME. By making use of a unique quarterly database of external assets and liabilities for Chile, we show that a measure of external imbalances is able to predict the real exchange rate over horizons of up to two years. Robust out-of-sample evidence on predictability reflects the fact that the external balance's importance to the exchange rate has risen in recent years and/or the precision of parameter estimates rises as sample size grows larger . When we break down our measure for external imbalances into its three component ratios (exports to imports, exports to assets, and assets to liabilities), we find that predictability is mainly driven by the last two. Our results suggest that researchers and policymakers should pay attention to external imbalances to understand the future dynamics of the real exchange rate. [ABSTRACT FROM AUTHOR]

In this paper we analyze intergenerational income and schooling mobility during the 1996-2006 decade in Chile. Using the countries most extended household panel survey, we overcome some of the limitations of the previous Chilean studies by using observed income data for both parents and children, as opposed to observed income data only for children and income data that is generated for parents from the information given by their children retrospectively. Following the recent literature, we control our estimates for time-series variation (Lee and Solon, 2009). Our results show high intergenerational income elasticities in comparison to other developing countries, and these values are higher for sons than for daughters. The same results hold for educational mobility. Trends analysis show that the transmission of economic status have remained constant during the last years in Chile, while educational mobility has increased. [ABSTRACT FROM AUTHOR]

There is substantial evidence suggesting that central banks in open economies react to exchange rate fluctuations, in addition to expected inflation and output. In some developing countries this reaction is comparatively larger and it is nonlinear . In an estimated structural macromodel for Chile, this paper assesses the advantages and potential costs of adopting such a reaction function. We conclude that, in the face of most of the external shocks, a policy rule that responds to exchange rate misalignments smooths inflation and output variability, while marginally increasing interest rate fluctuations. On the other hand, for some domestic innovations such a rule performs poorly. When all the shocks are considered at the same time, this rule generates important welfare gains. Finally, when the volatility of external shocks rises, increasing the response to exchange rate misalignments brings welfare improvements. In fact, a more aggressive response to the exchange rate offsets the impact that greater external volatility has on output and inflation, at the cost of inducing higher interest rate fluctuations. In this way, one can interpret the nonlinear reaction to the exchange rate as an optimal response to a more volatile external environment. [ABSTRACT FROM AUTHOR]