- Eliot Kalter, Steven Phillips, Manmohan Singh, Mauricio Villafuerte, Rodolfo Luzio, and Marco Espinosa-Vega
- Published Date:
- June 2004
© 2004 International Monetary Fund
Production: IMF Multimedia Services Division
Figures: Theodore F. Peters, Jr.
Typesetting: Alicia Etchebarne-Bourdin
- Chile: institutions and policies underpinning stability and growth/Eliot Kalter … [et al]—Washington, D.C.: International Monetary Fund, 2004.
- p. cm.—(Occasional paper, 231, 0251-6365; 231)
- Includes bibliographical references.
- ISBN 1589063252
- 1. Chile—Economic policy. 2. Capital market—Chile. 3. Banks and banking—Chile. I. Kalter, Eliot. II. Occasional paper (International Monetary Fund); 231.
HC 192.5.C45 2004
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- I. Overview
- II. The Role of Institutions in Chile
- Marco A. Espinosa-Vega and Steven Phillips
- Political Rules of the Game: The Constitution and Political Framework
- Fiscal Discipline: The Role of Institutions
- The Quest for Price Stability: The Role of Institutional Arrangements
- Financial Stability: The Chilean Approach to Banking Supervision, Regulation, and Safety Net
- Maintaining an Open Trade Policy Regime: The Role of Institutions
- Closing Observations
- III. Chile’s Macroeconomic Policy Framework
- Steven Phillips and Marco A. Espinosa-Vega
- The Floating Exchange Rate Regime
- Fiscal Policy: Targeting the Government’s Structural Balance
- IV. Capital Markets and Corporate Financing: Recent Developments
- V. The Chilean Banking System: Recent Developments
- Marco A. Espinosa-Vega
- Structure and Activities of the Banking System
- Recent Changes in Banking Regulation and Supervision
- Risk Management Policies, Prudential Indicators, and Stress Tests
- Preemptive Liquidity Measures: The Aftermath of the Inverlink Affair
- Grading by Rating Agencies
- Concluding Remarks
- VI. An Assessment of Chile’s External Position 54
- VII. Public Sector Finances: Balance Sheets, Financing Needs, and Sustainability
- VIII. Export Specialization and Economic Growth
- 2.1. Some Other Research Referring to Chilean Institutions
- 2.2. Central Bank Independence
- 3.1. Steps in the Development of Chile’s Macroeconomic Policy Framework
- 4.1. Establishing Debt Benchmarks in Chile: The Role of the Public Sector
- 5.1. The Credit Allocation Role of Banks in Chile
- 6.1. Distress Among Chile’s Foreign-Owned Corporations—The Cases of the Electric Companies Enersis and AES Gener
- 4.1. Financial Assets—Outstanding Stocks
- 4.2. Private Sector Financing Issuance
- 4.3. Domestic Corporate Bond Market
- 4.4. Private Debt and Issuance Characteristics
- 4.5. Share of Pension Funds in Financial Markets and Size of Markets
- 4.6. Pension Fund Administrators and Insurance Industry Investment Portfolio
- 4.7. Mutual Fund Investment, December 2002
- 4.8. Latin America: Liquidity in Fixed-Income and Equity Markets
- 4.9. Liquidity in Fixed-Income and Equity Markets
- 4.10. Chile: Ownership Concentration, 1998
- 5.1. Financial System Indicators
- 5.2. Long-Term Credit Ratings, as of June 2003
- 6.1. Chile: International Investment Position
- 6.2. Selected Countries: International Investment Position, 2001
- 6.3. External Debt Sustainability Framework
- 6.4. Gross External Financing Requirement
- 6.5. External Balance Sheet Indicators
- 7.1. Sensitivity of Government Debt Projections Under the Structural Balance Rule
- 7.2. Components of Central Bank Net Debt, 2002
- 8.1. Evolution of Export Concentration Indicators
- 8.2. Selected Countries: Herfindahl Index of Export Concentration
- 8.3. Chile: Evolution of Export Market Shares
- 8.4. Regression on Noncopper Export Growth
- 8.5. Real GDP and Export Volume Growth, Average Per Period
- 8.6. Selected Economies: Exports and Total Trade Ratios to GDP, Average 1998–2000
- 8.7. Chile: A Cointegrating Analysis of GDP and Exports
- 8.8. Export Volume and Average Growth Rates
- 8.9. Export Structure
- 1.1. Chile and other Latin American Economies: Selected Indicators
- 2.1. Inflation and Consolidated Government Debt
- 3.1. Inflation Target and Forecast
- 3.2. Inflation
- 4.1. Level of Financial Development for a Sample of Countries
- 4.2. International Investment Position
- 4.3. Selected Countries: International Investment Position, 2001
- 4.4. Emerging Market Economies: Private Sector Issuance
- 4.5. Selected Countries: Free-Float Measure
- 5.1. Nominal Versus Inflation-Indexed Loans and Deposits
- 5.2. Dollarization of the Banking System
- 6.1. Evolution of External Debt
- 6.2. Medium- and Long-Term External Debt by Type of Creditor, 2002
- 6.3. External Debt Sustainability Analysis
- 8.1. Differences Between Contribution of Exports to Growth in Chile and Largest Latin American Economies
- 8.2. Selected Economies: Educational Attainment and Income
- 8.3. Selected Economies: TIMSS Mathematics Results and Income, 1999
- 8.4. Selected Economies: TIMSS Mathematics Results and Inequality in Income, 1999
The following symbols have been used throughout this paper:
… to indicate that data are not available;
— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
- between years or months (e.g., 2003–04 or January-June) to indicate the years or months covered, including the beginning and ending years or months;
/ between years (e.g., 2003/04) to indicate a fiscal (financial) year.
“n.a.” means not applicable.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.
Most of the material presented in this occasional paper was originally prepared as a selected issues paper for discussion at the IMF Executive Board. These selected issues reviewed the institutions and policies adopted by Chile in the past two decades that have enabled it to reduce its vulnerabilities while benefiting from the ongoing process of globalization.
The idea of publishing these issues as an occasional paper arose from the Executive Board’s suggestion that this collection could provide a unified source of lessons for countries that, like Chile, are committed to undertake sustainable improvements to their economic policies and institutions. Since the publication is intended as a reference, it also includes some forward-looking suggestions.
The authors are grateful to the Chilean authorities for extensive and open discussions as well as for their assistance in providing data and other source material, and to a number of commentators for their patient feedback: Governor Vittorio Corbo, Finance Minister Nicolas Eyzaguirre, Economy Minister Jorge Rodriguez, Executive Director Guillermo LeFort, Antonio Ahumada, Jaime Crispi, Luis Eduardo Escobar, Helmut Franken, Rodrigo Fuentes, Leonardo Hernandez, Luis Oscar Herrera, Esteban Jadresic, Igal Magendzo, Mario Marcel, Jorge Perez, Bernardita Piedrabuena, Luis Salomo, Claudio Sapelli, Klaus Schmidt-Hebbel, Rodrigo Valdes, and seminar participants at the Central Bank of Chile. Finally, the authors are grateful to Andrew Swiston, without whose invaluable support this occasional paper could not have been prepared; Carmen Sanabia and Gloria Bustillo for their assistance in the preparation of the manuscript; and Esha Ray of the External Relations Department for coordinating production of the publication.
The opinions expressed in this paper are solely those of the authors and do not necessarily reflect the views of the IMF, its Executive Directors, or the Chilean authorities.