Description

The Board of the Central Bank of Chile has interpreted its constitutional mandate regarding price stability to mean that it must keep inflation centered on 3% annually, with some fluctuation, ranging from 2% to 4%. This book contains a detailed description of the economic models that assist the Board in this task. These are used in a pragmatic, eclectic and non-mechanical way to carry out projections. In a constantly changing economy, no single model can fully integrate all the factors relevant to implementing monetary policy. Making judgments regarding these diverse factors and their implications for monetary policy is the Board's prerogative and cannot be left to models alone, nor to those who build and run them. The models that the Central Bank of Chile currently uses are published in this volume as part of its commitment to increasing transparency. However, it is not the purpose of this paper to provide a view of the decision-making process as a whole; rather, this effort is limited to making known the main tools used to prepare projections, which represent one set of inputs into this process. This book describes the current status of development of Central Bank of Chile models, which are constantly being studied and improved as techniques for dealing with macroeconomic policy problems advance. The Board of the Central Bank of Chile will determine its approach to future advances in this area, according to the challenges that arise.