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Central Bank Autonomy: The Chilean Experience

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  • Luis Felipe Céspedes C.
  • Rodrigo Valdés P.

Abstract

A selective revision to the theoretical and empirical literature on macroeconomic performance and central bank autonomy, yields new evidence of the relationship between the latter and the passthrough coefficient from the exchange rate to inflation. An analysis follows, from diverse viewpoints, to the way central bank autonomy has worked in practice in Chile, what were the issues being debated at the beginning and how they have unfolded later. The Central Bank of Chile’s (CBC) autonomy is then compared with that of other central banks, discussing the role of central banks’ capital. The conclusion from the analysis is that the CBC’s experience with autonomy has had very positive results.

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Bibliographic Info

Article provided by Central Bank of Chile in its journal Economía Chilena.

Volume (Year): 9 (2006)
Issue (Month): 1 (April)
Pages: 25-47

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Handle: RePEc:chb:bcchec:v:9:y:2006:i:1:p:25-47

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  1. Francisco Rosende, 1989. "Elementos para el Diseño de un Marco de Análisis de la Autonomía del Banco Central," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 26(77), pages 25-38.
  2. Devereux, Michael B. & Engel, Charles & Storgaard, Peter E., 2004. "Endogenous exchange rate pass-through when nominal prices are set in advance," Journal of International Economics, Elsevier, vol. 63(2), pages 263-291, July.
  3. Roberto Zahler, 1989. "La Inserción Institucional del Banco Central de Chile," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 26(77), pages 97-114.
  4. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-62, May.
  5. Daniel Tapia, 1993. "Experiencia del Banco Central Autónomo," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 30(91), pages 349-356.
  6. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Working Papers in Applied Economic Theory 94-05, Federal Reserve Bank of San Francisco.
  7. Herman Bennett & Norman Loayza, 2002. "Policy Biases when the Monetary and Fiscal Authorities Have Different Objectives," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.), Monetary Policy: Rules and Transmission Mechanisms, edition 1, volume 4, chapter 11, pages 299-330 Central Bank of Chile.
  8. Bindseil, Ulrich & Manzanares, Andrés & Weller, Benedict, 2004. "The role of central bank capital revisited," Working Paper Series 0392, European Central Bank.
  9. Peter Stella, 1997. "Do Central Banks Need Capital?," IMF Working Papers 97/83, International Monetary Fund.
  10. Calderon, Cesar & Schmidt-Hebbel, Klaus, 2003. "Macroeconomic policies and performance in Latin America," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 895-923, December.
  11. Nicolás Eyzaguirre & Rodrigo Vergara, 1993. "Reflexiones en Torno a la Experiencia de Autonomía del Banco Central de Chile," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 30(91), pages 327-348.
  12. José Pablo Arellano, 1989. "Comentarios al Proyecto de Ley del Banco Central," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 26(77), pages 91-96.
  13. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-98, September.
  14. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
  15. Claudia Helene Dziobek & John W. Dalton, 2005. "Central Bank Losses and Experiences in Selected Countries," IMF Working Papers 05/72, International Monetary Fund.
  16. Alan S. Blinder, 2000. "Central-Bank Credibility: Why Do We Care? How Do We Build It?," American Economic Review, American Economic Association, vol. 90(5), pages 1421-1431, December.
  17. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  18. Francisco Rosende, 1993. "La Autonomía del Banco Central de Chile: Una Evaluación Preliminar," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 30(91), pages 293-326.
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