burden source : central bank of chile based on information from sbif, svs, suseso. figure 11 national employment and unemployment rate ( seasonally - adjusted series, percent ) - 1 - 2 quarterly change in employment unemployment rate sources : central bank of chile and national statistics bureau ( ine ). figure 12 monetary impulse and fiscal packages 4. 5 korean republic fiscal stimulus packages in 2009 ( % gdp ) 4. 0 3. 5 3. 0 2. 5 china canada japan germany 1. 5 indonesia 1. 0 mexico france 0. 5 italy - 200 chile u. s. a. australia 2. 0 0. 0 russia india - 400 south africa argentina united kingdom turkey brazil - 600 - 800 - 1, 000 - 1, 200 current mpr versus maximum mpr during 2007 - 2009 ( basis point ) sources : central bank of chile, bloomberg, international monetary fund and finance ministry. table 1 economic growth and current account ( annual change, percent ) 2009 ( f ) 2010 ( f ) gdp national income 4. 7 7. 1 3. 2 3. 8 - 1. 9 - 2. 3 4, 5 - 5, 5 7. 5 domestic demand domestic demand ( w / o change in inventories ) gross fixed capital formation total consumption goods and services exports goods and services imports 7. 8 8. 2 12. 0 7. 1 7. 6 14. 9 7. 4 7. 9 19. 5 4. 2 3. 1 12. 9 - 7. 4 - 3. 3 - 16. 1 1. 5 - 4. 1 - 15. 7 8. 9 4. 6 8. 2 3. 5 5. 4 14. 3 current account ( % of gdp ) 4. 4 - 2. 0 2. 1 0. 6 ( f ) forecast. source : central bank of chile. table 2 parities with respect to the u. s. dollar ( index 2005 = 100 ) currency australian dollar brazilian real canadian dollar chilean peso colombian peso czeck koruna euro hungarian forint indonesian rupiah israeli shekel japanese yen korean won mexican peso new zealand dollar norwegian krone peruvian peso polish zloty russian ruble 15 - sep - 08 maximum 96. 5 67. 8 88. 7 94. 7 88. 5 74. 7 94. 5 93. 3 101. 9 81. 5 101. 8 107. 3 95. 7 108. 2 94. 4 90. 6 77. 9

the housing bubble was caused by monetary policy, which failed to act opportunely and permitted severe imbalances to accumulate. nonetheless, one must bear in mind that soaring asset prices do not necessarily end up in a crisis like this one. closer attention must be paid to the financial fragility that accompanied this process, whose main culprit was the unrestrained financial innovation that generated deep distortions that neither markets nor regulators were able to predict. an expansionary monetary policy can undoubtedly induce an excessive increase in the prices of assets and credit. the role of monetary policy, in our case carried out through an inflation targeting regime, is to smooth the business cycle. therefore, it is possible to think that a very expansionary monetary policy can exacerbate an economic boom. likewise, such a policy will have serious consequences on output once the monetary impulse is withdrawn. however, an expansionary monetary policy could not explain by itself the severity of the financial collapse the world is seeing today. there are countries where the monetary policy was expansionary, with interest rates at their minimum, and no housing bubble occurred. a couple of examples are canada and chile, two inflation targeters where, consistently with this policy framework, interest rates hit very low levels not so different from the fed funds rate ( figure 3 ). still, housing prices generally did not experience increases comparable with those of other economies, and their financial systems have remained sound. furthermore, in some cases housing prices did go up high, with clear signals of a bubble being formed. however, their financial systems made it through and remained stable and, despite the current difficulties including very recessive episodes, have avoided acute financial crisis. this is the case with, for example, australia and spain. naturally, when facing disproportionate increases in the price of housing, both the level of borrowing and the building boom associated with it are symptoms that the downturn that comes with the cycle will be severe. this is because of the deleveraging that households will have to undertake and the contraction of the building activity. still, this need not result in a systemic financial crisis. in any case, monetary policy can and does help in the creation of bubbles, although not so much by the level of the interest rate but by the monetary policy strategy with which financial turmoil is dealt with. in the united states, the strategy of turning a blind eye to the period of soaring asset prices and then cleaning the mess when it was already there used to