Chile: Foreign Shocks and Policy Responses

In 2009, the world is facing the worst recession in more than six decades. Chile has been no exception. In spite of this outlook, the Chilean economy stands on solid ground, and recent figures show that the recovery has started. This article discusses the fundamentals of the Chilean economy and how economic policies have responded to the strong foreign shocks of the past few years. These range from the severe inflation outburst over part of 2007 and 2008, the consequences of the world’s financial crisis and the current risk of an extended period of low inflation.