Chile had a decade of non-active monetary policy but repeated changes to exchange rates, however a banking crisis in the mid-1980s forced the central bank to intervene more; after 1990 it adopted informal inflation targets and these became formal and better structured from 2000.
|Years||Targets and attainment||Classification|
|1974-86||monetary system initially largely nationalised and controlled but these soon reversed in wide financial liberalisation; monetary policy instruments largely indirect; extensive indexation; strong official preference for non-active monetary policy, so focus of policy on structural rather than conjunctural issues; exchange rate initially dual, unified 1976 and then adjusted frequently and in varying ways; banking crisis 1983-7 leads central bank to be more active||unstructured discretion UD|
|1987-90||main monetary instrument is open market operations to affect interest rate on indexed central government securities; exchange rate adjusted, now more for competitiveness and growth purposes, margins widened from 1988; central bank independence law 1989||loosely structured discretion LSD|
|1991-99||informal converging inflation targeting (target in central bank’s annual report), not yet recognised as such by IMF; 1995 main monetary instrument becomes interest rate on one-day operations between central and commercial banks||loose converging inflation targeting LCIT|
|2000-2017||full formal inflation targeting from September 1999, with exchange rate now floating; inflation targets met, except overshoot 2007-8 and undershoot 2009-10, but 2-year-ahead inflation expectations remain anchored; improvements to central bank communication||full inflation targeting FIT|
Selected IMF references: RED 1975 pp29, 34, 49; RED 1982 pp31-3; RED 1986 pp30-4; RED 1991 pp29-30; RED 1995 chII; SI 2003, chII; SR 2009 p11; SR 2011 p18; SR 2015 p23, SR 2018 p11.
Additional sources: Corbo and Fischer (1993); Morande and Schmidt-Hebbel (2000).
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