CEPAL Review no. 124

228 CEPAL Review N° 124 • April 2018
where e t
is the exchange rate (pesos per dollar) in period t. The following variables are also defined
(Ley, 2010):
it is us possible to arrange equation (A9) to express it on the same terms as equation (13) presented
in the body of the paper.
where e t
is the rate of depreciation of the exchange rate. The nominal interest in period t is equal to:
Just as it is possible to divide debt into its domestic and external components, GDP can be
decomposed between tradable output (superscript “i”) and non-tradable output (superscript “e”). 25
Defining the following variables:
and following an algebraic procedure similar to that applied for debt, nominal GDP in period t can be
written as a function of nominal GDP in the previous period:
where inflation in period t is defined as:
25
See the separation proposed by Restrepo and Soto (2006) for calculating the tradable and non-tradable shares of GDP.
Fiscal sustainability and the cyclically adjusted balance policy: methodology and analysis for Chile