Eighty Years of History of the Central Bank of Chile

Abstract

The Central Bank of Chile was founded in 1925, to provide the country with an institution that could stabilize the currency, regulate interest and discount rates, and avoid disruptions in the country’s financial, industrial and economic development (Decree Law Nº486, August 22, 1925). But a weak institutional framework meant that the Bank, far from ameliorating these problems, aggravated them, leading to decades of high and persistent inflation. Inflation became under control only during the past decade, after a new law enacted in 1989 granted the Central Bank with full independence, allowing it to implement an Inflation Targeting Monetary Policy Regime. In achieving this result were also fundamental the fiscal stability and the building of a robust financial sector, both attained since the mid 1980s. This paper reviews the history of the Central Bank of Chile since its early days, putting its changes in the appropriate historical context.