Working Paper
Assessing Inflation Targeting during Crisis Periods: An Application to the Chilean Economy
Luis Pino-Sandoval, Iván Araya, Gabriel Pino
Resumen
This paper investigates the ability of inflation targets to control inflation during the Asian and Subprime crises using the Chilean case. To this end, we use time-varying modeling to estimate inflation persistence from 1990 to 2022 through a Phillips-curve specification. Our results show that inflation targeting has effectively decreased persistence since this implementation began in the 1990s. Nevertheless, the Asian and Subprime crises introduced significant instability in inflation persistence. After the Asian crisis, inflation targeting effectively decreased persistence; however, this was not the case after the Subprime crisis. Therefore, our results suggest that the Subprime crisis had deep consequences on the ability of the Chilean monetary policy to control inflation.
Investigación en curso sobre el régimen de metas de inflación en períodos de crisis y su aplicación a la economía chilena.