Diaz D.,University of Chile |
Theodoulidis B.,University of Manchester |
Dupouy C.,Central Bank of Chile
Expert Systems with Applications | Year: 2016
Modelling the structure of risk-free rates and their relation to other economic and financial variables during different stages of the economic cycles has attracted much interest from both the theoretical and practical perspectives. The previous literature has emphasized the deployment of expert systems and knowledge-discovery approaches motivated by the need to address the limitations of the econometric models. However, it has failed to address the interpretability aspects and, more importantly, the need to provide methodological support that allows the deployment of such techniques in a more systematic way. This approach entails the definition of a process that includes the usual steps taken by experts to address similar problems and allows the relative merits of different techniques in relation to common goals and objectives to be gauged. This paper addresses the interpretability and the lack of methodological support by proposing a knowledge-discovery methodology that includes a minimal common number of steps to model, analyse, evaluate and deploy different non-linear techniques and models. Furthermore, the interpretability is addressed through the use of open-box techniques, such as decision trees. The proposed methodology helps to discover and describe hidden patterns, allowing for the study and characterization of economic cycles, and economic cycle stages, as well as the description of the historic relationships between interest rates and other relevant economic variables. These patterns can also be used in the forecasting of economic cycle stages, interest rates and other related variables of concern. The output of the methodology can provide actionable information for market agents, such as monetary authorities, financial institutions, and individual investors, as well as for the academic community, to increase further the knowledge and understanding of financial markets, thus enriching and complementing existing financial theories. © 2015 Elsevier Ltd. All rights reserved.
Fuentes M.,Central Bank of Chile |
Ibarraran P.,Office of Strategic Planning and Development Effectiveness
Journal of International Trade and Economic Development | Year: 2012
In this article, we study the effect of North American Free Trade Agreement (NAFTA) on the responsiveness of Mexican economy to real exchange rate shocks. We argue that, by opening the US and Canadian markets to Mexican goods, NAFTA made it easier for domestic producers to take advantage of the opportunities brought by the depreciation of the real exchange rate. To identify this mechanism, we use plant-level data and compare the behavior of employment, production and investment after two big real exchange rate shocks: the first observed in the mid-1980s, the second the Tequila Crisis of 1994-1995. The evidence indicates that after passage of NAFTA exporting firms exhibited higher growth rates of employment, sales and investment vis-à-vis non-exporters. We confirm our results by analyzing the behavior of a control group of firms, that had complete access to the US market during both devaluations, and we show that they responded in a similar way in both events. Finally, we also provide direct evidence on the relationship between exports and tariff reductions brought by NAFTA. Our results support the view that NAFTA has allowed Mexican producers to respond more quickly to real exchange shocks. © 2012 Copyright Taylor and Francis Group, LLC.
Pedersen M.,Central Bank of Chile
Finance a Uver - Czech Journal of Economics and Finance | Year: 2015
The present paper analyzes the propagation of shocks to food and energy prices in 46 countries with data from the period 1999-2010. Empirical evidence suggests that in all but one country shocks to either energy or food prices propagate to prices of goods and services included in the core inflation measures. In general, the propagation effect of food price shocks is larger than that of energy price shocks. Emerging economies are more affected by propagation than are advanced ones, which is supported by analysis of variance decompositions, which suggests that especially food components explain the larger part of the variability of core inflation in emerging countries. The weights of food components in the consumer baskets seem to impact the magnitude of propagation, particularly in emerging economies. The results advocate that policymakers concerned with price stability should pay special attention to shocks affecting domestic food price. © 2015, Faculty of Social Sciences. All rights reserved.
Carriere-Swallow Y.,Central Bank of Chile |
Labbe F.,Central Bank of Chile
Journal of Forecasting | Year: 2013
Most economic variables are released with a lag, making it difficult for policy-makers to make an accurate assessment of current conditions. This paper explores whether observing Internet browsing habits can inform practitioners about aggregate consumer behavior in an emerging market. Using data on Google search queries, we introduce an index of online interest in automobile purchases in Chile and test whether it improves the fit and efficiency of nowcasting models for automobile sales. Despite relatively low rates of Internet usage among the population, we find that models incorporating our Google Trends Automotive Index outperform benchmark specifications in both in-sample and out-of-sample nowcasts, provide substantial gains in information delivery times, and are better at identifying turning points in the sales data. Copyright © 2011 John Wiley & Sons, Ltd.