##aligned from fundamentals, the intervention may be successful in realigning the currency. if not, sterilized intervention will most likely be ineffective, and for this reason is important to have a strong presumption that the currency has moved away from fundamentals before intervening. 3 in addition, foreign exchange intervention allows authorities to increase the international liquidity position of the economy so as to insure against a future curtailment of capital inflows. naturally, a booming economy, with a widening current account deficit, persistent appreciation and low inflation may need some stabilization if the expansion is deemed to be unsustainable. fiscal policy could help, but unfortunately it is not always available, especially in countries with a weak fiscal history. another tool, with weak evidence supporting its for further discussion on the use of monetary policy to affect asset prices, in particular in the context of inflation targeting in open economies, see de gregorio ( 2010b ). in economies following inflation targets is important that the intervention be coherent with the inflation outlook to avoid undermining credibility. intervention can also be part of unconventional policies to reach the inflation target when interest rates are close to the zero lower bound. effectiveness, is capital controls. 4 regardless of whether they are effective or not, they may hide policy distortions. for example, policymakers thinking that capital controls are effective at insulating the economy from capital inflows, may tighten monetary policy to slowdown the expansion, but instead induce further inflows that look for loopholes to avoid the controls. for this reason i think that a more promising avenue is to look at the impact of capital inflows on financial stability. indeed, many of the booms in asset prices and activity that come with capital inflows are caused and amplified in the financial system. capital inflows and financial stability from the macro point of view, i have emphasized currency risks associated to capital inflows. a flexible exchange rate should help mitigate this risk. in addition, the development of the foreign exchange derivatives market should allow private agents to hedge against currency risk. in addition, capital inflows may be behind the development of bubbles in domestic asset prices, and there are also macro tools to deal with them. however, there are other risks that must be considered, which have implications on macro prudential regulation. note that these risks may be relevant even when net capital flows are limited. therefore, from the standpoint of financial stability, gross flows become

output gap would allow boosting growth in a stable manner from just less than 2 % in recent years to a 2. 5 % to 3 % range. as i mentioned before, this is grounded on a better external scenario, the fading of some sectoral factors that have slowed down the pace of growth, a more expansionary monetary policy, and the lack of macroeconomic growth constraints. this requires more dynamic exports, domestic demand and investment. 22. a more significant increase in investment that brings it closer to its historical rates, coupled by increased factor mobility, would boost growth to a sustainable rate of around 3. 5 %. this would require revitalizing mining investment, better investor expectations in the rest of the economy, favorable financial conditions, and the elimination of bottlenecks that hinder the reallocation of resources toward more competitive areas. a smooth operation of both the labor market and the capital market is essential for this. 23. regarding productivity growth in the other sectors, the possibility of further improvements relies mainly on : ( 1 ) increasing human capital accumulation through increased labor participation, raising working skills above the already projected levels or the migration of workers with the competences required by the chilean system ; and making productivity improvements via enhancing companies ’ efficiency, lowering production and trading costs, and changing output composition toward more competitive and productive sectors, while advancing in terms of innovation and technological development. 24. as chile ’ s concern for growth has intensified, many ideas about public policies have emerged that could help enhance productivity, with proposals coming from the government, private agents and the national productivity commission. in particular, policies have been developed that have permitted to diversify the energy matrix, increase supply reliability and reduce costs. there have been other factors, however, that pose a risk to productivity, including initiatives that may overburden corporate costs, generate new trading costs or reduce savings. 25. finally, any discussion about productivity must necessarily cover technological development. this is a key driver of economies ’ productivity and competitiveness around the world. it is obvious in my opinion that the new technologies, knowledge and innovation capacity are input into the productive system through new ventures, investments and restructurings.