Chile: Determinants of non-tradable inflation

Summary

Tradable inflation, which has a high correlation with the exchange rate, has played a major role in accounting for the recent high CPI inflation, but the increase in non-tradable inflation (NTI), generally associated with changes in domestic economic conditions, has also played a not inconsiderable part. We have estimated a model for NTI determinants and conclude that there will be strong downward pressure of around 1pp.

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