Chile

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
2000-2014 full formal inflation targeting from September 1999, with exchange rate now floating; overshoot 2007-8, undershoot 2009-10, but inflation expectations remain anchored 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.

Additional sources: Corbo and Fischer (1993); Morande and Schmidt-Hebbel (2000).

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