The chilean experience in completing markets with financial indexation

For a Chilean capital market participant, it may be hard to imagine a world without the indexation unit, the Unidad de Fomento (UF). Most market participants would probably agree that the UF played a central role in the creation of a local capital market and also that it has had a positive impact on...

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Autor principal:	Walker Hitschfeld, Eduardo
Formato:	Artículo
Lenguaje:	eng
Publicado:	Banco Central de Chile 2019
Materias:	MERCADO FINANCIERO MERCADO DE CAPITALES INFLACIÓN DEUDA PÚBLICA
Acceso en línea:	https://hdl.handle.net/20.500.12580/3634
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spelling	oai-20.500.12580-36342021-04-24T10:56:14Z The chilean experience in completing markets with financial indexation Walker Hitschfeld, Eduardo MERCADO FINANCIERO MERCADO DE CAPITALES INFLACIÓN DEUDA PÚBLICA For a Chilean capital market participant, it may be hard to imagine a world without the indexation unit, the Unidad de Fomento (UF). Most market participants would probably agree that the UF played a central role in the creation of a local capital market and also that it has had a positive impact on growth and welfare. The trouble, of course, is proving it, which is precisely what this paper aims to do. From an investor’s perspective, financial indexation may have quite a different role than the one presumably assigned to it by economic authorities. For the latter, indexation may represent an efficient mechanism for signaling to the market a commitment to keeping inflation under control. This, in turn, has to be weighed against the possibility of smoothing taxes by letting inflation dilute the value of the outstanding nominal government debt, although this creates certain time inconsistencies. 1 From this perspective, then, completing the financial market is not directly relevant, even though it may be important for determining the financial costs of government debt. The optimal government debt structure could take into account its implications on welfare, efficiency, and the completeness of the financial markets. 2019-11-01T00:01:34Z 2019-11-01T00:01:34Z 2002 Artículo 956-7421-110 https://hdl.handle.net/20.500.12580/3634 eng Serieson Central Banking, Analysis, and Economic Policies, no. 2 Attribution-NonCommercial-NoDerivs 3.0 Chile http://creativecommons.org/licenses/by-nc-nd/3.0/cl/ .pdf Sección o Parte de un Documento p. 259-293 application/pdf CHILE Banco Central de Chile
institution	Banco Central
collection	Banco Central
language	eng
topic	MERCADO FINANCIERO MERCADO DE CAPITALES INFLACIÓN DEUDA PÚBLICA
spellingShingle	MERCADO FINANCIERO MERCADO DE CAPITALES INFLACIÓN DEUDA PÚBLICA Walker Hitschfeld, Eduardo The chilean experience in completing markets with financial indexation
description	For a Chilean capital market participant, it may be hard to imagine a world without the indexation unit, the Unidad de Fomento (UF). Most market participants would probably agree that the UF played a central role in the creation of a local capital market and also that it has had a positive impact on growth and welfare. The trouble, of course, is proving it, which is precisely what this paper aims to do. From an investor’s perspective, financial indexation may have quite a different role than the one presumably assigned to it by economic authorities. For the latter, indexation may represent an efficient mechanism for signaling to the market a commitment to keeping inflation under control. This, in turn, has to be weighed against the possibility of smoothing taxes by letting inflation dilute the value of the outstanding nominal government debt, although this creates certain time inconsistencies. 1 From this perspective, then, completing the financial market is not directly relevant, even though it may be important for determining the financial costs of government debt. The optimal government debt structure could take into account its implications on welfare, efficiency, and the completeness of the financial markets.
format	Artículo
author	Walker Hitschfeld, Eduardo
author_facet	Walker Hitschfeld, Eduardo
author_sort	Walker Hitschfeld, Eduardo
title	The chilean experience in completing markets with financial indexation
title_short	The chilean experience in completing markets with financial indexation
title_full	The chilean experience in completing markets with financial indexation
title_fullStr	The chilean experience in completing markets with financial indexation
title_full_unstemmed	The chilean experience in completing markets with financial indexation
title_sort	chilean experience in completing markets with financial indexation
publisher	Banco Central de Chile
publishDate	2019
url	https://hdl.handle.net/20.500.12580/3634
work_keys_str_mv	AT walkerhitschfeldeduardo thechileanexperienceincompletingmarketswithfinancialindexation AT walkerhitschfeldeduardo chileanexperienceincompletingmarketswithfinancialindexation
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The chilean experience in completing markets with financial indexation

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