The evolution of inflation in Chile since 2000

We analyse the evolution of inflation in Chile over the last decade and a half through the lenses of the new keynesian theory. We do this first by reviewing the evidence relating to the main channels put forward by this framework: the output gap, inflation expectations, indexation to past inflation and the exchange rate. Based on the evidence gathered, we provide an interpretation of the inflation process in Chile. We show that in general terms the evolution of inflation can be explained consistently by the evolution of those elements. Critical to our finding is a differentiation of the dynamics of goods and services inflation. Full Publication: Inflation Mechanisms, Expectations and Monetary Policy