In 1998, the CBC was ranked 25 among 60 countries, while reaching the first place in the world ranking in 2004, holding this place in the subsequent years (figures 13-14). 4. Conclusions  Macroeconomic conditions have improved significantly in emerging economies since the early 1990s. Emerging economies show major progress in fiscal responsibility and sustainability; adoption of a framework of central bank autonomy, monetary regimes based on IT, and larger exchange-rate flexibility; and achievement of financial system strength. Adoption of more flexible exchange rates and an IT regime has contributed to lower output and inflation volatility, and stronger credibility of central bank policies. Macroeconomic stability is often accomplished gradually. Chile adopted the IT regime in two distinct phases and implemented a solid macroeconomic framework based on central bank autonomy with a clear focus on price stability. This was supported by a solvent, responsible, and predictable fiscal policy and a solid and well-regulated financial system. Chile’s good record of attaining inflation levels close to the target has strengthened private sector confidence in the CBC and raised MP effectiveness and credibility. Low inflation and a credible monetary policy represent an essential macroeconomic achievement. By improving its policy framework, supported by strong transparency, accountability, and communication, the CBC has laid a major foundation to Chile’s macroeconomic stability. Yet the conquest and predictability of inflation are not guaranteed. The CBC will remain vigilant, improving its policy framework as needed to continue delivering high levels of macroeconomic stability.

This transition in MP regime has been more pronounced in Latin America. While in 1994 twelve countries in the region had in place an ER anchor, and four others had a monetary growth anchor, by 2004 only three countries remained with an ER anchor. The transition of policy frameworks during 1994-2004 led to a significant rise in the number of Latin American countries with a floating regime (from three to twelve countries) and an inflation targeting framework (from one to five countries). 2. Chile’s transition to its current monetary policy framework  The macroeconomic institutional and policy framework of Chile has been transformed radically in the last 25 years, from one that made stabilization an exceptional result to one that has facilitated achieving price stability. Chile’s current macroeconomic framework is based on four pillars: (i) an autonomous Central Bank with the explicit mandate of safeguarding stability of prices and payments; (ii) a low public-debt to GDP ratio and a fiscal policy rule anchored to a structural fiscal surplus; (iii) a robust financial system, with a dynamic, competitive, and well capitalized banking industry, appropriately regulated and supervised; and (iv) a full-fledged inflation targeting monetary framework, complemented by a floating ER regime. Substantial progress was made in CBC autonomy since the 1980s, when autonomy was very weak, even at lower levels than in the average emerging economy. The granting of legal independence in 1989 through constitutional law, led to a much improved position in the international ranking of central bank autonomy.