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High Frequency Dynamics of the Exchange Rate in Chile

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  • Kevin Cowan
  • David Rappoport
  • Jorge Selaive

Abstract

We estimate a reduced form model for the daily dynamics of the nominal spot exchange rate in Chile. The model does reasonably well in explaining the long and short run dynamics for the peso-dollar exchange rate for the period 2001-2006. In addition, we extend the model to evaluate the effects of the foreign investment of pension funds, foreign exchange rate interventions by the Central Bank and other events whose effects on the exchange rate have policy implications. We find –in line with previous work conducted at the Central Bank - that the impact of Central Bank actions on the FX market seemed to be better channeled through public announcements. Moreover, we find that changes in the pension funds limits on foreign assets had significant, but small and transitory effects on the spot peso-dollar exchange rate.

Suggested Citation

  • Kevin Cowan & David Rappoport & Jorge Selaive, 2007. "High Frequency Dynamics of the Exchange Rate in Chile," Working Papers Central Bank of Chile 433, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:433
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. International Monetary Fund, 2013. "Chile: Selected Issues," IMF Staff Country Reports 2013/199, International Monetary Fund.
    2. Mr. Yi Wu, 2013. "What Explains Movements in the Peso/Dollar Exchange Rate?," IMF Working Papers 2013/171, International Monetary Fund.
    3. Ana María Abarca G. & Felipe Alarcón G. & Pablo Pincheira B. & Jorge Selaive C., 2007. "Nominal Exchange Rate in Chile: Predictions based on technical analysis," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 10(2), pages 57-80, August.
    4. Rodrigo Caputo G. & Marco Núñez N. & Rodrigo Valdés P., 2008. "Análisis del tipo de cambio en la práctica," Investigación Conjunta-Joint Research, in: Centro de Estudios Monetarios Latinoamericanos (CEMLA) (ed.), Estimación y Uso de Variables no Observables en la Región, edition 1, volume 1, chapter 11, pages 313-364, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
    5. Sebastián Claro & Luis Opazo, 2014. "Monetary policy independence in Chile," BIS Papers chapters, in: Bank for International Settlements (ed.), The transmission of unconventional monetary policy to the emerging markets, volume 78, pages 111-123, Bank for International Settlements.
    6. Balázs Égert, 2010. "The Impact of Monetary and Commodity Fundamentals, Macro News and Central Bank Communication on the Exchange Rate: Evidence from South Africa," Open Economies Review, Springer, vol. 21(5), pages 655-677, November.
    7. Pincheira, Pablo & Hardy, Nicolas, 2018. "The predictive relationship between exchange rate expectations and base metal prices," MPRA Paper 89423, University Library of Munich, Germany.
    8. Pablo García & Sindy Olea, 2015. "Inversión Minera y Ajuste Macroeconómico en Australia y Chile," Economic Policy Papers Central Bank of Chile 56, Central Bank of Chile.
    9. Ana María Abarca & Felipe Alarcón & Pablo Pincheira & Jorge Selaive, 2007. "Chilean Nominal Exchange Rate: Forecasting Based Upon Technical Analysis," Working Papers Central Bank of Chile 425, Central Bank of Chile.
    10. Michael Pedersen, 2019. "The impact of commodity price shocks in a copper-rich economy: the case of Chile," Empirical Economics, Springer, vol. 57(4), pages 1291-1318, October.
    11. Leonardo Salazar, 2017. "Modeling Real Exchange Rate Persistence in Chile," Econometrics, MDPI, vol. 5(3), pages 1-21, July.
    12. Luis A. Ahumada & Álvaro García & Luis Opazo & Jorge Selaive, 2009. "Interbank Rate and the Liquidity of the Market," Working Papers Central Bank of Chile 516, Central Bank of Chile.
    13. Gabriela Contreras M. & Alfredo Pistelli M. & Camila Sáez M., 2013. "Efecto de Intervenciones Cambiarias Recientes en Economías Emergentes," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 16(1), pages 122-137, April.
    14. Rodrigo Caputo G. & Marco Núñez N. & Rodrigo O. Valdés P., 2008. "Exchange Rate Analysis in Practice," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(1), pages 61-91, April.

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