Explaining inflation and output volatility in Chile: an empirical analysis of forty years

This paper presents a data-oriented analysis of the effects of
different kinds of economic shocks on Chilean output growth and
inflation over the last 40 years. Two important results highlight
the role of trade openness and countercyclical monetary policies
to explain structural changes in the Chilean economy: (1) foreign
shocks only explain 17% of the variability of output growth in
the 1984-2006 period, whereas it used to account for 47.2% in
1966-1983; and (2) The relative importance of foreign shocks in
explaining inflation volatility has become more important in the
last twenty years.