Description

After a brief review of the rationality of the systematic conduct of monetary policy, this paper details some of the challenges that it poses. First, there is the difficulty to conceptualize the lags in the transmission of monetary policy actions, because since by definition they are deviations from a pattern of systematic behavior, they should generally be not very c ommon or persistent under well - functioning policy regimes . Second is the difficulty to empirically estimate , through policy rules, the systematic behavior of monetary policy. In the particular case of Chile, we highlight the differences between measuring the output gap in real time or in current time, and also the role of extraordinary monetary policy actions during 2009 . We conclude with a discussion on how we must interpret, even under a narrow mandate of price stability, whether monetary policy is truly being countercyclic.