New Frontiers for Monetary Policy in Chile
This paper assesses the efficiency of the current Inflation Targeting (IT) scheme in place at the Central Bank of Chile. Using a small macroeconomic model of the Chilean economy, our main results are as follows: (i) an efficient monetary policy requires a bias towards output stabilization around its long run trend; (ii) the switch to forecast-targeting, implicit in the current IT scheme in Chile, results in an efficiency gain; (iii) targeting core inflation is not efficient; (iv) ceteris paribus, efficiency could be enhanced if monetary policy leans against the wind when facing shocks to the cost of international finance.
Year of publication: |
2001-11
|
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Authors: | García, Pablo S. ; Herrera, Luis Oscar ; Valdés, Rodrigo |
Institutions: | Banco Central de Chile |
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