02014cas a2200313 a 4500 AALejournalIMF002570 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451971668 1018-5941 BD-DhAAL BD-DhAAL Mendoza, Enrique. Efficient Arbitrage Under Financial Indexation : The Case of Chile / Enrique Mendoza. Washington, D.C. : International Monetary Fund, 1991. 1 online resource (36 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students 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. Mode of access: Internet Financial System imf Indexation Mechanism imf Inflation Rate imf Inflation Risk imf WP imf Chile imf IMF Working Papers; Working Paper ; No. 1991/049 Full text available on IMF http://elibrary.imf.org/view/journals/001/1991/049/001.1991.issue-049-en.xml IMF e-Library