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

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 econom...

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Bibliographic Details
Main Author: Albagli, Elías
Other Authors: Calani, Mauricio, Hadzi-Vaskov, Metodij, Marcel, Mario
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2020
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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653 |a Payment Systems 
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653 |a Exchange rate arrangements 
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653 |a Regimes 
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653 |a Monetary economics 
653 |a Price Level 
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520 |a 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)