Abstract

The price of copper plays a critical role in the Chilean economy, with the mining sector accounting for approximately 10% of the country's GDP and 50% of its exports. Consequently, shocks affecting this sector can have significant repercussions for the economy as a whole. In this study, we first employ state-of-the-art structural VAR models to identify flow demand, flow supply, and storage shocks in the global copper market. Second, we examine how these shocks affect Chilean macroeconomic aggregates. Our findings not only reaffirm earlier conclusions regarding the effects of rising commodity prices on currency appreciation and inflation, but also provide evidence of the potential detrimental consequences of copper demand shocks on other sectors of the economy, carrying important implications for economic policy in resource-dependent countries such as Chile.