Chile: Stagflation, more a myth than a reality

Summary

In Chile, we have seen simultaneously an economic growth below potential and a consumer inflation above the target since early 2014. This has raised voices suggesting that our economy would enter in a process of stagflation. In this context, our goal is to determine how likely is the stagflation scenario in Chile, and how it has evolved the frequency, magnitude and determinants of such episodes in the past fifty years. Finally, we assess the implications of the current scenario for the expected behavior of economic policy.

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