Central Bank Autonomy [1.2739]

Abstract

This paper argues the need to maintain an autonomous Central Bank, in order to allow it to adequately carry out its mandate of maintaining monetary and financial stability, considering that it is the basis for the development of economic activity within society and taking into account the effects of inflation. The paper will be divided into three sections. The first one sets out the organic composition of the Bank. The second focuses on the autonomy of the institution, indicating what it consists of and presenting arguments in favor of it: the nature of inflation as a monetary phenomenon; the existence of inflationary biases; the unequal impact it has on society; its evolution in Chile; and the correlation between the autonomy of the Central Bank and inflation. Finally, the third section addresses some controversial topics about the institution: whether the Central Bank should have constitutional or only legal autonomy; the political trial of the Bank's directors; review of the reform introduced by Law No. 21.253; and the relevance of incorporating new mandates to the institution.