Assessing the Effects of Foreign Financial Shocks on the Chilean Economy

Francisco Cabezon

doi:10.4067/S0718-88702012000200004

Authors

Francisco Cabezon Superintendency of Banks and Financial Institutions - Chile

DOI:

https://doi.org/10.4067/S0718-88702012000200004

Keywords:

Foreign financial shocks, volatility, foreign stock markets, domestic variables, Chilean economy

Abstract

This paper aims to assess the effects of foreign financial shocks on the Chilean economy, for which a model including foreign and domestic series, for both real and financial variables at quarterly frequency is estimated. Among the main results, it is found that Chilean GDP is negatively and significantly affected by shocks in the volatility of foreign stock markets, while the Chilean currency depreciates and the domestic interest rate decreases due to this type of innovations.

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