Macroeconomic policy decisions have profound implications for our economies, and there is a long-running debate among economists as to whether these decisions should follow pre-defined rules or be left to the discretion of policymakers. Following rules provides reduced economic uncertainty, because the economic actors are able to form expectations as to how policymakers will behave. But how do we know which rules are the ‘right’ ones? And are policymakers able to credibly commit to sticking to the rules? The argument for discretion is that it allows policymakers wide latitude to design the best policy response for the given circumstances. But is this the best policy?

In this lecture Chile’s central bank governor will interrogate the evidence and distil lessons from practice in emerging economies, focusing on Chile in particular.