##economic policies. we cannot forget that inefficiencies in the regulatory framework were at the heart of the buildup of risks in the run - up to the crisis. the fact that fragilities in the financial system, namely inadequate levels of capitalization and liquidity, were not properly and timely identified, may primarily reflect inadequacies in regulation and supervision. our best response is to continue strengthening regulation and supervision regimes aimed at avoiding future crises. and central banks have a crucial role to play because there are clear complementarities between financial and monetary stability, which, as is the case of chile, are often formally recognized in central banks ’ official mandates. before referring to what we have done on this matter in chile, let me briefly describe our experience with the global financial crisis and our macroeconomic policy response to it. while we were still enjoying the commodity boom of the 2000s, we were hit by the spillover effects of the crisis and its aftermath, namely the tightening of domestic lending conditions, capital outflows, a reduction of the external demand for our exports and a decrease in the price of copper, which is still the main source of external income for the chilean economy, and in particular an important source of revenues for the treasury. the price of this critical commodity fell more than 60 percent in just five months. exports fell almost 20 percent in two years, a strong shock for an economy where exports accounted for more than 40 percent of gdp. a similar drop experienced public revenues, with those coming from copper production falling 23 percent in 2008 and 50 percent the following year. despite the severity of the shocks, economic performance and the resilience of the financial system have been better than in comparable situations in the past. behind this favorable response of the chilean economy lies a macroeconomic policy framework able to pursue an effective reaction, and a regulatory scheme supporting the high resilience of the domestic financial system. in chile the monetary policy framework consists of a flexible inflation - targeting regime with a floating exchange rate. this framework has allowed us to respond efficiently to external shocks keeping inflation expectations anchored. before the asian crisis of 1998, we had a managed exchange rate and we had capital controls in place to allow monetary policy independence to manage inflation in a context of abundant capital inflows. indeed, we experienced a costly adjustment to that episode, and this was fueled in part by financial stability concerns that called against an exchange rate adjustment. but once the harder times had passed, the exchange rate was allowed

world growth? do all the emerging economies have fiscal room to back a weak scenario, or it has been shrinking after the strong stimulus packages of 2008 – 2009? and there are the local tensions, too. certainly, the climate of political and social unrest is not the most appropriate to confront a further deterioration of the world economy. for the same reason, this scenario imposes more than ever the challenge of building an effective solution for these specific problems, but always safeguarding macroeconomic stability and strengthening our capacity to grow. this is not only about the specific policies we apply, but also about how we resolve our problems. as much as some have trouble admitting – it seems that the trendy thing is to complain about everything – our country is exemplary. in the past few decades, all of us chileans have enjoyed progress like never before in our history. and, granted, there are many tasks ahead, we are a role model for many countries. in this conjuncture we must also set an example resolving urgent and critical problems and continuing building an ever more prosperous country for all. thank you. bis central bankers ’ speeches figure 1 world activity ( * ) ( index, iv. 07 = 100, quarterly series ) iv. 07 iv. 08 iv. 09 emerging iv. 10 developed ( * ) regions weighted at ppp. developed economies include : australia, canada, denmark, the eurozone, japan, new zealand, sweden, switzerland, the u. k. and the u. s. emerging economies include argentina, brazil, bulgaria, chile, china, colombia, the czech republic, hong kong, india, indonesia, israel, latvia, malaysia, mexico, peru, the philippines, south korea, russia, singapore, south africa, taiwan, thailand, turkey and venezuela. source : central bank of chile based on bloomberg, the imf and statistics bureaus of respective countries. figure 2 cpi inflation around the world commodity prices ( annual change, percent ) - 2 - 2 - 4 - 4 u. s. eurozone latin america emerging asia ( monthly index, jan. 00 - sep. 11 = 100 ) emerging europe fao foodstuffs wti oil ( 1 ) regions weighted at ppp. data through august 2011. ( 2 ) cpi includes argentina, brazil, chile, colombia, mexico and peru. ( 3 ) cpi includes china, india, indonesia, malaysia, south korea, thailand and taiwan. ( 4 ) cpi includes the czech republic, hungary, poland, russia