TY - BOOK ID - 84540597 TI - Efficient Arbitrage Under Financial Indexation : The Case of Chile PY - 1991 SN - 1462319769 1455273694 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Banks and Banking KW - Deflation KW - Economic theory & philosophy KW - Economic Theory KW - Economic theory KW - Expectations KW - Finance KW - Financial Markets and the Macroeconomy KW - Financial services KW - Inflation KW - Interest rates KW - Interest Rates: Determination, Term Structure, and Effects KW - Macroeconomics KW - Monetary Policy KW - Price Level KW - Prices KW - Rational expectations KW - Real interest rates KW - Speculations KW - Chile UR - https://www.unicat.be/uniCat?func=search&query=sysid:84540597 AB - Legal restrictions governing financial transactions in Chile have produced a system in which most financial assets are either 30-day non-indexed assets or 90-day indexed assets. This paper analyzes data on the rates of return of these assets to determine the extent to which efficient arbitrage takes place under conditions of partial financial indexation. The data cannot reject the joint hypothesis that participants in financial markets formulate their expectations rationally and that these markets operate efficiently. The data also shows that the indexed/non-indexed interest spread is an accurate predictor of future changes in inflation. The significant implications of these findings for the conduct of monetary policy are also discussed in some detail. ER -