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Bergoeing, Raphael, Patrick J. Kehoe, Timothy J. Kehoe, and Raimundo Soto, 2002a, “Decades Lost and Found: Mexico and Chile Since 1980,” Federal Reserve Bank of Minneapolis Quarterly Review, Vol. 26, No.1, pp.3-30.
Bergoeing, Raphael, Patrick J. Kehoe, Timothy J. Kehoe, and Raimundo Soto, 2002b, “Policy-Driven Productivity in Chile and Mexico in the 1980s and 1990s,” NBER Working Paper No. 8892.
Chari, V.V., Patrick J. Kehoe, and Ellen R. McGrattan, 2006a, “Appendices: Business Cycle Accounting,” Federal Reserve Bank of Minneapolis Research Department Staff Report No. 362.
Chari, V.V., Patrick J. Kehoe, and Ellen R. McGrattan, 2006b, “Business Cycle Accounting,” Federal Reserve Bank of Minneapolis Research Department Staff Report No. 328.
Appendix 1. Data Sources and Calculations
Appendix 2. Results from Benchmark Model
Appendix 3. Sensitivity Analysis
We thank Ellen R. McGrattan for her code and her continuous help. We also thank Brieuc Monfort, Martin Mühleisen, James P. Walsh and Jeromin Zettelmeyer for their comments and suggestions. Research assistance provided by Zlatko Nikoloski is greatly appreciated. Ina Simonovska would also like to thank Costas Arkolakis for his comments and suggestions. All remaining errors are ours. This paper was written while Ina Simonovska was an intern at the Western Hemisphere Department of the IMF.
In this paper, all lowercase-letter variables represent aggregate (uppercase-letter) variables per working-age person (population aged 15-64) rather than per capita. Bergoeing et al. (2001) argue that this is an appropriate choice since Chile experienced demographic transitions during the 1960-2000 period as population growth rates fell sharply and the percentage of working-age persons in the total population changed. This way, we ensure that no demographic changes are captured in the wedges of the model. In addition, all variables are divided by a labor endowment of 1250 hours per quarter.
Throughout this exercise, we use the solution method and estimation suggested by Chari et al. (2006a). In fact, we modify the original code generously provided by Ellen R. McGrattan in order to apply it to our study of Chile. We refer the reader to Chari et al. (2006a) and Chari et al. (2006b) for a detailed explanation of the accounting procedure.
Recall that one interpretation of the investment wedge is the relative ease of financing of investment versus consumption.
The corresponding sensitivity test results for the benchmark model are available on request.