Abstract:
This epilogue is paired with case 2298.0, which ends with President Boric facing immense pressure to identify the root cause of his country's 2022 inflation crisis. Through a short narrative and several exhibits, it reveals several key government responses. First, Congress rejected two proposals for further pension fund withdrawals. Meanwhile, a proposed new constitution was struck down in a public referendum. Finally, in late 2022, the Central Bank and the Ministry of Finance concluded that excess demand had overheated the economy, driving the spike in inflation. In response, the epilogue lays out the actions taken to finally push inflation back down, primarily through continued increased interest rates.
Learning Objectives:
Through this case, students will:
1. Diagnose whether Chile's high inflation rates in 2022 were the result of aggregate supply or aggregate demand shocks.
2. Evaluate whether Chile's economy was overheated in 2022, and identify the indicators that support that determination.
3. Determine whether a fiscal, monetary, or social security policy solution is preferable, taking into consideration not only feasibility and timing, but also the macroeconomic and political consequences (positive and negative) of each.
