Download file 418 KB Texto completo en español More of: José De Gregorio

The world is in the midst of a severe crisis. And Chile, despite the great soundness demonstrated by its financial system, is not immune. This article begins with a discussion of the effects of the monetary policy on the prices of assets and financial stability. Then follows a discussion of the effects of the crisis on inflation and activity. Inflation went from massive, unexpected increases to strong decreases because of the ampleness and drop in the international prices of commodities. The effects on activity can be explained by the domestic economic cycle, real and financial effects of the international crisis and the global confidence crisis. Finally, the article discusses the different policies implemented by the Central Bank to ensure that its goals of inflation and operation of the domestic and foreign payment systems are met, particularly monetary relaxation.