- sectional heterogeneity in income and wealth, the so - called heterogeneous agent models, or bewley - huggett economies. the main takeaway from these earlier models is that one could rationalize the low observed real interest rate, inconsistent with representative agent models with complete markets, in a model in which households have precautionary savings motives to insure against income shocks. in this framework, the degree of income uncertainty and credit constraints shape wealth inequality and imply a real interest rate in equilibrium that better resembles that in the data. another key development was the widespread increase in access to large - scale microdata, which helped the profession to evaluate existing economic theories and build better economic models. microdata has been a cornerstone to the inclusion of heterogeneity into macroeconomic models, as it allows a deeper understanding of individual behaviors. without it, theoretical models could not be adequately tested. for 2 / 5 bis - central bankers'speeches example, the work by benjamin garcia, mario giarda, and carlos lizama that will be presented in this conference combines location - based microdata on credit and debit card transactions with income surveys to show that fiscal policy programs that focused on lower - income regions are associated with larger consumption responses, as predicted by models of heterogeneous agents with liquidity constraints. these theoretical and empirical advances in the literature were complemented by the improvement of computational capabilities. these gave rise to the recent development of the so - called heterogeneous agents new keynesian model or hank model, which incorporated important features that improved the standard new - keynesian - model'fit to the data and introduced new transmission mechanisms of monetary policy. one of the main lessons from these models is that the direct effects of monetary policy on consumption, the so - called intertemporal substitution channel, can be very small compared to its indirect effects on income, which are shaped by general equilibrium forces that depend on the characteristics and behavior of households. another important recent theoretical development is the model of heterogeneous firms and financial frictions, which alters the way we think about the transmission of monetary policy. while the empirical evidence suggests small effects of monetary policy on aggregate investment, the use of disaggregated data allowed us to observe that investment of firms with " good " financial conditions reacts strongly to monetary policy but not so the investment of financially constrained firms. therefore, the effect of monetary policy depends on the distribution of firm

credit lines. notwithstanding, the central bank of chile will continue to monitor the external financial conditions in order to mitigate the domestic impact of potentially bigger complications. from the inflationary standpoint, our latest monetary policy report assumed that the international scenario would not contribute in any significant manner to reduce inflation. however, our risk scenario also assumed that a further deterioration of the world economy could not be ruled out, and we are seeing it today. most likely, in the near future world growth projections will be significantly adjusted downward, helping to reduce inflationary pressures as a function of the benchmark basket of the investment portfolio. in the medium term. in addition, commodity prices have dropped recently, including a sharp reduction in the prices of oil and grains, especially wheat. our objective and commitment is that annual inflation gradually converge, over a two - year period, to its 3 % target, so monetary policy will continue to be oriented to complying with said objective. the potential inflationary consequences of events occurring internationally will be duly pondered. we have in place a flexible monetary policy that allows for gradual adjustments to both changing international conditions and domestic developments, strongly committed with inflation control, because low inflation ensures the necessary stability for sustained economic growth. we do this while never neglecting our obligation with the stability of the payment system. therefore, in the past several weeks we have also contributed to alleviate liquidity stress. our commitment is to continue to walk this road to the extent that circumstances so dictate. our economy is not immune to episodes occurring elsewhere in the world and that is what we have been experiencing. however, we are on a good stand to deal with very adverse environments, and it is the commitment of the central bank board to ensure the best possible performance of the chilean economy in times of turmoil and uncertainty at their highest. with that in mind, we have established a monetary / foreign exchange policy scheme – as well as an international liquidity position – that will help us soften the potential repercussions of the current problems of the world economy. thank you.