months. recent public discussions have centered on parity movements. the real exchange rate is, without any doubt, a key variable in resource allocation and in the balance between saving and investment. unlike conjunctures of past decades, in particular those of the mid - 1980s, the chilean economy has dealt with the complex global financial situation from a much sounder standpoint. the sudden global collapse of late last year found us with no big currentaccount or fiscal deficit, nor with a high external debt requiring strong fiscal adjustments with substantial real depreciation that would place the economy in a sustainable medium - term path. on the contrary, the significant contraction of domestic demand, in particular for imported durable goods and inventories, spontaneously and quickly undid the incipient external deficit of the second half of 2008 and interest rates in chile dropped. the chilean economy has continued to show a very solvent net external position. figure 2 cpi and selected inflation measures ( annual change, percent ) - 2 cpi - 2 mar - 03 mar - 04 mar - 05 mar - 06 mar - 07 mar - 08 mar - 09 cpix cpix1 cpi minus foods and energy sources : national statistics bureau ( ine ) and central bank of chile. as we have pointed out on earlier occasions, persistent movements of the exchange rate may have inflationary consequences that must be taken into account when deciding on the monetary impulse. anyway, our floating regime admits intervening in exceptional cases, whenever an overreaction of the exchange rate is detected that is giving misleading signals to the financial markets. in addition, although there is no obvious misalignment of the current real exchange rate from its long - term fundamentals, the present inflationary scenario may accommodate a nominal depreciation that does not compromise our price stability objective. in fact, imported inflationary pressures influence medium - term inflation, so if the recent appreciation of the peso persists, inflationary prospects will certainly moderate, which, as i just stated, has implications on the conduct of monetary policy. from the public finance standpoint, it is hardly obvious that the aforesaid situation could have been avoided with a different mix of credit sources for the necessary fiscal impulse. this, because the level and the structure of interest rates are also important when trying to affect gaps and inflation in the medium term. summing up, the changes we have seen in the macroeconomic scenario since last may lead us to think that, if anything, inflationary pressures are less than were

on the other hand, institutions have been able to raise capital according to needs ; the us treasury even authorized some of the bailed - out banks to repurchase the preemptive stocks they issued when receiving the governmental support under tarp. one key factor behind this set of elements pointing at stabilization is, without a doubt, the scale of the monetary and fiscal stimulus packages that have been implemented in large parts of the world, in both developed and emerging economies. this is a significant difference between this crisis and the great depression. although it has been claimed that the financial debacle we have experienced recently is similar in magnitude to the one that originated the great depression, the lessons learned from it have allowed policies to act much faster, with more effective and pragmatic responses. in those days, fiscal authorities tried to keep their budgets balanced, even when the economic depression had settled in, in 1937, thereby deepening the contraction of aggregate demand. in the case of monetary policy, the premature reduction of the monetary stimulus in 1936 contributed decisively to the recession of 1937 - 38. the current monetary policy has played its role in providing liquidity and generating an expansionary stimulus. the much more flexible monetary and fiscal policies of today have also avoided the intrusion of protectionist distorting measures that so prolonged the crisis of the 1930s, amplifying its costs and deeply hurting the later economic development in several regions of the world, including our country. still, it is likely that returning to domestic demand levels like the ones we had before the crisis takes a while, especially in the united states. active fiscal policy actions have taken up the room left by the shrinkage of private spending. however, it cannot be sustained for long. the natural, sustainable solution will come via net exports from the us and, to a lesser extent, from europe. how it will happen is an open question, because it is also yet to be seen which economies will, as counterparts, have to reduce their own net exports to create the necessary space for such an adjustment. furthermore, this may call for major parity adjustments in the main economic areas. beyond this last point, currently floating foreign exchange regimes have played a stabilizing role, providing every degree of freedom needed by monetary policy and by liquidity provision measures to tackle the cycle and the financial stability objective. this element was nowhere to be seen in the 1930s, when the main central banks struggled hard, but ineffectively, to defend the gold standard, severely mag