. 1x - 400 0 5 10 15 20 - 20 - 15 - 10 - 5 - 5 - 5 - 10 - 10 - 15 - 20 - 20 - 15 - 10 - 5 y = 16 + 1. 19x 0 5 10 15 20 - 15 y = - 0. 5 + 0. 15x 0 5 10 15 20 - 20 - 20 - 15 - 10 - 5 y = - 1. 9 + 1. 1x 0 5 10 15 20 us monetary policy shock ( bp ) ( † ) a rise in fx indicates a depreciation of the domestic currency against the dollar. the sample corresponds to the post nov - 08 average. source : central bank of chile. recent research conducted at the central bank of chile highlights this point. figure 1 shows the impact of us mp shocks ( changes in us short - term rates around federal reserve meetings ) on er and long - term bond prices in chile ( with clean floating ) and mexico, which has actively intervened in recent years. the figure illustrates this pattern, showing a significant response of the chilean peso but a non - significant movement in long - term bond prices. the opposite results hold for mexico. 2 similarly, the response at country - group level also indicates differences when an us mp shock hits other countries'mp rate decomposed into expected mp rate and term premium ( see table 1 ). whereas in aes the adjustment mechanism is mainly through expected mp rate, the transmission in emes is via the term premium. er comes out as more reactive in aes rather than emes, presumably because central banks in emes are less prone to conduct sterilized fx interventions, aiming to — partially — stabilize interest rates and the er simultaneously. table 1 : us mp spillovers ( † ) 10 - year interest rate expected interest rate term premium fx depreciation advanced economies 2003 - 2016 post nov. 08 0. 335 * * * 0. 429 * * * 0. 331 * * * 0. 234 * * * 0. 005 0. 196 * * * 7. 50 * * * 10. 920 * * * emerging economies 2003 - 2016 post nov. 08 0. 293 * * * 0. 557 * * * 0. 054 0. 136 * * 0. 239 * * * 0. 421 * * * 3. 520 * * * 6. 660 * * ( † ) the country sample includes 12 emes and 12 aes. the panel regressions

emes business cycle aes business cycle vix ( inverse, standardized, 10x ) comm. px cycle ( excl. fuel ) [ rhs ] ( † ) business and commodity prices based on hp filter. source : central bank of chile based on imf and fred databases. the experience of chile since 2000 chile has been traditionally exposed to global cycles, speeded - up growth in the mid - 1980s, once a major financial crisis led to a major upgrade in financial regulations. this bonanza period was halted by the asian crisis in mid - 1997. the central bank tried to sustain the chilean currency, by then under crawling bands, in the middle of a substantial external shock. this led the central bank to raise the interest rate to 14 %, by then a real interest rate. thus, the financial system face overnight rates of nearly 100 %. the chilean economy enters into a recession in late 1998. floating er was added to forward - looking inflation targeting, and then complemented by a structural balance - based fiscal policy in the early 2000s. since then, the chilean economy has been able to cushion external shocks pretty successfully, with wide fluctuations in the er. fx interventions have not been ruled out but done only four times in 18 years. during the global financial crisis, financial institutions faced liquidity constraints, especially from local subsidiaries of international banks, which were resolved by extraordinary liquidity injections by the central bank and a major fiscal impulse. the end of the commodity bonanza translated into currency devaluation, but the economy only slowed down rather than entering a recession and growth is now recovering very rapidly. above all, macro policy has been successful in cushioning external shocks, so now they have a milder impact compared to past episodes. in perspective, chilean mp today is among the most expansionary of a group of comparable countries ( figure 3 ). this persistent expansionary monetary impulse is also observed in consumer, commercial, and mortgage interest rates, which are all at or very near their all - time lows. moreover, different qualitative measures produced by the central bank of chile coincide in their favorable evaluation of the cost of credit, considering its low interest rate. in addition, in recent years it has maintained a remarkable degree of independence from the us mp, especially after the great financial crisis ( see figure 4 ). figure 3 : actual mpr versus taylor rule ( † ) 2. 0 2. 0 1. 5 1. 5 1. 0 1. 0