Monetary Policy Independence in Chile

Sebastian Claro, Luis Opazo

Research output: Chapter in Book/Report/Conference proceedingChapter


International financial integration and a high co-movement in risk premia have caused long-term interest rates in developing countries to become highly correlated with long-term interest rates in the main financial centres. Arguably, this reveals a limit to monetary policy independence. We analyse the case of Chile since the early 2000s, showing that exchange rate flexibility and inflation credibility have enhanced the ability to have a monetary policy based upon domestic inflationary objectives. The apparent tension between a central bank’s capacity to determine short-term monetary conditions while exerting a less strong influence on the long end of the yield curve suggests that a complementary role for other macroprudential tools is required if price and financial stability objectives are to be achieved. Full publication: <a href="" target="_blank">The Transmission of Unconventional Monetary Policy to the Emerging Markets</a>
Original languageAmerican English
Title of host publicationThe transmission of unconventional monetary policy to the emerging markets
Place of PublicationBasel, Switzerland
PublisherBank for International Settlements
ISBN (Electronic)92-9197-567-3
ISBN (Print)92-9131-566-6
StatePublished - 2014

Publication series

NameBIS Paper No. 78g


  • Monetary policy independence
  • interest rates
  • financial integration
  • Taylor rules


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