Description

The current global financial crisis has prompted significant debate around the proper management of monetary policy and its role in preventing financial crises. This management becomes particularly complex when faced with extreme scenarios such as the current one, taking into account the dual mandate most modern central banks have, which are safeguarding both price stability and financial stability. This paper discusses some aspects of monetary and financial policies in periods of stress. It also discusses how Chile’s macroeconomic framework and prudent private sector behavior will now bear fruit in the worst financial episode the world has had to endure in many decades.