Monetary policy in small open economies is typically cast as a choice between an exchange rate anchor (fixed or predetermined exchange rates) and a money anchor (floating exchange rates). Under such regimes, the growth rate of the nominal anchor is set according to the desired long-run inflation rate. After undergoing a not necessarily painless adjustment process, the economy would eventually reach the long-run inflation rate.
Attribution-NonCommercial-NoDerivs 3.0 Chile
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