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)| false Romaguera, Pilar, and Dante Contreras, 1995, “ Impacto Macroeconómico de la Inestabilidad del Precio del Cobre en la Economía Chilena,” in Pascó-Font, Alberto edit.La Administratión de los Ingresos por Exportaciones Mineras en Bolivia, Chile y Perú, ( Lima, Peru: GRADE).
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World Metal Statistics, Various Issues, Published by World Bureau of Metal Statistics.
The author thanks Pablo Cabezas, Nicolás Eyzaguirre, Martine Guerguil, Esteban Jadresic, Martin Kaufman, Francisco Nadal-De Simone, Piritta Sorsa, Peter Wickham, and especially Saul Lizondo; the author also thanks Chilean officials for comments on a preliminary draft.
The real importance of the copper sector is probably underestimated given that many industrial activities are related to the mining sector.
These and several following figures are taken from the CODELCO statistical bulletin.
Copper accounted for 42 percent of Chilean exports in 1986, which is the same share as in 1997. Also, considering the mining sector overall, the share of exports was 50 percent in 1986, and is the same in 1997. In terms of GDP, the mining sector declined steadily from 10 percent in 1986 to 8 percent in 1997.
The manufacturing export unit value from IFS is used in order to deflate the nominal price of copper.
For an overview of the stylized facts of the Chilean business cycle in the period 1986-97 see Belaisch and Soto (1998).
In the United States, the smoothness of consumption is mostly due to low volatility in the consumption of nondurable goods, which is roughly half as volatile as GDP, while durable goods are more volatile than real GDP (Kydland and Prescott, 1990). In the case of a developing country, most durable goods are imported and are very sensitive to the real exchange rate. As reported below, Chile’s real exchange rate is linked to the copper cycle. This could explain why in periods of copper booms, consumption of imported durable goods increases, explaining the “excess volatility” of consumption over the cycle. Unfortunately, there are no disaggregated data on consumption of durable versus nondurable goods to check this hypothesis.
Disaggregated data on investment in construction and machinery are not available on a quarterly frequency. The quarterly data were constructed assuming that the shares of investment in the two categories were the same during the year.
Both imports and exports are measured in constant Chilean peso terms.
Figure 11 shows a moving average of the trade balance in order to control for the strong seasonal variations that characterize imports and exports. For this reason, Figure 12 also shows the four quarter differences instead of the quarter-to-quarter differences. Finally, these pictures are in terms of local currency; by using dollars, a slightly different picture emerges.
The nominal exchange rate is expressed as pesos per U.S. dollar so that a depreciation of the peso increases the nominal exchange rate.
The real exchange rate is defined as an increase in the exchange rate indicates a real appreciation.
Real lending rates are obtained from line 60p of IFS and subtracting the inflation rate. This is the rate charged by banks on loans of 30 to 89 days. For this reason, this is a good indicator of the stance of monetary policy.
Since both series (real copper exports and Chile’s real GDP) have a unit root and are not cointegrated, first differences in the regression are used; the lags are chosen according to standard criteria. Log is used so that the estimated results are easily interpreted as elasticities. For other information on the regression see the technical appendix.
There is a missing observation for imports; given that two lags of the dependent variable are used, the number of usable observations is reduced from 36 to 33. In principle, it is not advisable to use time series data with a gap in the middle. Nevertheless, the results of this regression are presented for completeness of the analysis
Given that the innovations in the price of copper are quite persistent, the textbook response of consumption to an innovation in the price of copper in the absence of credit constraints is an almost immediate update to the new long term path. Considering the high volatility and uncertainty, an immediate response should not be expected.