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Mrs. Esther Perez Ruiz
Chile’s small open economy with significant mismatch between the production and consumption baskets may be represented by three stylized sectors, a commodity sector, a non-commodity tradable sector, and a non-tradable sector. This paper estimates the effect of copper price shocks on mining, manufacturing, and construction—each embodying a sector type. The empirical findings are for positive spillovers from mining to the other two sectors. However, the estimated size of the spillovers seems modest, which raises the question of the potential for mining to be better integrated with the rest of the economy.
International Monetary Fund. External Relations Dept.

of the Fund’s resources by Bangladesh, which became a member of the Fund in August 1972. The SDR 39.5 million equivalent purchase by Chile—in deutsche mark, Japanese yen, Netherlands guilders, Belgian francs, French francs, and special drawing rights—was prompted by a steep fall in the value of that country’s exports, owing mainly to a sharp decline in the market price of copper, a commodity accounting for nearly 80 per cent of Chilean exports. The downward trend in copper prices resulted from an imbalance in world demand and supply as economic growth slackened

International Monetary Fund

partners and lower copper prices resulted in an external current account deficit of 2 percent of GDP in 2008. However, the sharp compression of imports that accompanied the decline in domestic demand, shifted the current account into a projected surplus in 2009. The policy response to the crisis has been sizable, well balanced and coordinated. Liquidity support measures have helped preserve financial stability. Since early 2009, the Central Bank of Chile cut the policy rate by 775 basis points, to an historic low of ½ percent, and the government announced a stimulus

Mrs. Esther Perez Ruiz

of Copper Price Shocks Source: IMF Staff calculations. Delayed response in mining output . A one percent point shock to copper prices results in a negative response of mining GVA on impact, reaching a low at almost 0.1 percentage points below the baseline two to three quarters after the shock, and remains negative for about three years. This is due to the cost of intermediate inputs increasing by more than the gross volume of output. Mines are often run at close to full capacity, and a sudden increase in copper prices encourages increased extraction of

International Monetary Fund. African Dept.

aligned with the exporter status: lower oil and copper prices result in even higher spreads for countries that export these commodities—amplifying the effect of the sizable terms-of-trade shock—while the impact on oil importers is significantly lower, as investors recognize the windfall gains for their economies that the large oil price decline has brought. In addition, investors appear to have increased their emphasis on country fundamentals as the sensitivity of higher current account balances, international reserves, and inflation on the spreads increased

International Monetary Fund
This 2009 Article IV Consultation highlights that the Chilean economy has proved resilient in the face of the global financial crisis. The policy response to the crisis has been sizable, well balanced, and coordinated. Executive Directors have commended the Chilean authorities for their sound policy framework underpinned by an inflation target regime, a structural budget rule, and a flexible exchange rate regime. Directors have also endorsed the Central Bank of Chile’s decision to implement alternative means of monetary easing to support activity and a return of inflation to the target.
International Monetary Fund. External Relations Dept.
This paper analyzes the issue of migrant workers in Europe. The paper highlights that the number of migrant workers currently in the major industrialized countries of Western Europe is not accurately known. The actual annual flow of migration into Western Europe has been growing rapidly in recent years. Most migrants are so-called annual or permanent workers, although in France, particularly in agriculture, and in Switzerland, “seasonal” migration is also important. The paper also highlights that the sectoral distribution of migrant workers tends to follow the pattern of sectoral employment growth in the receiving country.