Development of the Foreign Exchange Derivatives Market in Chile

Authors

Keywords:

derivatives market, foreign exchange market, exchange rate regime, international reserves, Chile

Abstract

This article develops an international comparison, characterization and econometric evaluation about the development of Chilean FX derivatives market using a unique database of exchange rate operations performed by residents against domestic and international counterparts. The level of activity of the Chilean spot exchange rate market as well as its transaction costs are similar to those in more advanced economies, and a level of exchange rate derivative market above other emerging economies, yet at a significant distance from developed economies. Also, the article reports a growing number of foreign counterparts and a maturity of derivatives contracts slightly above the world average. From the cross country level regressions, it is worth mentioning the positive role of flexible exchange rate regimes as well as the negative effect of international reserve accumulation on the development of the exchange rate market. It is shown that the Chilean FX activity converges to the levels suggested by the estimation, according to the fundamentals of the economy. Nonetheless, it states at a significant distance from countries like Australia, New Zealand, and Canada.

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References

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Published

2007-04-30

How to Cite

Ahumada, L. A., & Selaive C., J. (2007). Development of the Foreign Exchange Derivatives Market in Chile. Economic Analysis Review, 22(1), 35–58. Retrieved from https://www.rae-ear.org/index.php/rae/article/view/66

Issue

Vol. 22 No. 1 (2007)

Section

Articles

License

Copyright (c) 2007 Luis Antonio Ahumada, Jorge Selaive C.

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This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

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