A Decade of Inflation Targeting in Chile: Developments, Lessons, and Challenges
In: Inflation Targeting: Desing, Performance, Challenges
Chile was among the first countries in the world to adopt a monetary framework based on an explicit, publicly announced, annual inflation target, when the term "inflation targeting" had not been even formalized. The country’s inflationary past suggested to combine tough inflation targeting parameters (to enhance the Central Bank’s reputation) and a gradual transition from moderately high inflation to a long-run inflation goal of 3%. After attaining this long-run objective in 1999 and a reputation of inflation-averse, the Central Bank of Chile has moved toward flexibility along the credibility-flexibility trade-off. Finally, having a third objective in the form of an asymmetric threshold for the current-account deficit was reflected in some episodes during which the implicit short-run output stabilization objective was made less important. Notwithstanding the success in reducing inflation during the 90s, without apparently paying real costs, the current inflation target regime faces a few challenges in its quest for keeping a low and stable inflation.
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|This chapter was published in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.) Inflation Targeting: Desing, Performance, Challenges, , chapter 14, pages 583-626, 2002.|
|This item is provided by Central Bank of Chile in its series Central Banking, Analysis, and Economic Policies Book Series with number v05c14pp583-626.|
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