, and households, still need to be monitored. in chile, as mentioned above, these mismatches are limited due to fx hedging and regulation. the cbc was an early adopter of an inflation - targeting regime, shortly after its independence granted in 1989. a fully floating fx regime was adopted in september 1999 and capital controls where abolished in a necessary step to complete a coherent framework to effectively control inflation. since then, the central bank has kept its commitment of no intervention in the fx market, except when required by extraordinary circumstances. page 9 of 12 central bank of chile september 2019 high - level policy seminar on integration or fragmentation? international capital flows in the post - crisis world, september 2019 central bank of chile monetary policy framework and its effectiveness the chilean experience with capital controls and fx interventions fx rate and capital controls : 1990 - 2018 ( * ) international reserves and fx interventions : 1982 - 2017 ( clp per usd ) ( millions of usd ) capital controls fx interventions fx bands reserves requirements to the foreign loan and later extended it to capital flows not related to debt, the american certificates of deposit of foreign shares, and potentially speculative fdi. increased the discount rate. free floating ( * ) foreign exchange rate defined as clp per usd. sources : central bank of chile and de gregorio, j., s. edwards, and r. valdes ( 2001 ), “ controls on capital inflows : do they work? ” nber wp 7645. all these elements allow monetary policy to operate as a first defense mechanism against external shocks in normal times. besides monetary policy, the cbc has a financial stability mandate. such mandate should be pursued by a combination of regulation, information, and macroprudential management. in particular, monetary policy tools should be used primarily to achieve the price stability mandate, and only as a last resort to deal with financial instability. the free - floating fx regime is perfectly consistent with achieving both mandates ( price and financial stability ), as ( i ) the inflation targeting regime is highly credible, and ( ii ) the corporate sector is well hedged against exchange rate volatility. high - level policy seminar on integration or fragmentation? international capital flows in the post - crisis world, september 2019 central bank of chile monetary policy framework and its effectiveness institutional investors provide a natural base for financial market deepening and market - based fx - risk coverage instruments main financial assets holders ( * ) derivatives market activity ( percent ) ( annual transactions, percent of gdp

s and central bank of chile based on information from bis, wb, imf and bloomberg. over time, markets have developed adequate fx hedging mechanisms having lower currency mismatches, inflation expectations have become firmly anchored at the monetary policy target level, the cbc has overcome fear of floating and the economy exhibit one of the lowest fx pass - through to domestic prices, financial markets have deepened and the labor market has gained some flexibility. as the chilean economy is not immune to external shocks, the ability to cushion them through fx and countercyclical policy response has improved significantly. high - level policy seminar on integration or fragmentation? international capital flows in the post - crisis world, september 2019 central bank of chile monetary policy framework and its effectiveness the erpt is one of the lowest in latam, the corporate sector shows a contended currency mismatch, and inflation expectations have remained anchored throughout the it period, currency mismatch over 10 % in the corporate sector ( * ) exchange - rate pass - through compared ( percentage ) actual and expected inflation indicators ( percentage ) ( percent of total assets ) 0. 7 erpt - headline 0. 6 imported comp. erpt - core 0. 5 0. 4 0. 3 0. 2 0. 1 inflation ( headline ) inflation ( core ) inflation expectations ( 11 - month ahead ) inflation expectations ( 23 - month ahead ) - 2 colombia mexico uruguay peru chile adv. ec. latam - 5 eme. asia brazil bolivia latam argentina paraguay costa rica eme. europe panama 0. 0 - 4 16 18. i ( * ) based on a sample of firms that report their balance sheet in pesos. currency mismatch is the difference between foreign currency liabilities and foreign currency assets, less the net position in derivatives ( the difference between buy and sell positions in derivatives contracts ). sources : wb, imf, bis and central bank of chile, based on data from financial markets commission ; imf reo western hemisphere, 2016. regarding the risk at the public sector, in normal times the fiscal space is determined by the fiscal rule and public indebtedness. fiscal policy in chile is based on a structural ( cyclically - adjusted ) balance rule adopted in 2000, but after seven years of strict compliance of a 1 % surplus target, a tacit escape clause was called at the time page 8 of 12 central bank of chile september 2019 of the gfc, raising the structural deficit from 0. 5