The time series evidence for Chile shows that monetary and fiscal policies
have been largely countercyclical--in particular after 1993, when country
risk spreads fell below the 200-300 basis pointrange.These results are robust
to alternative measures of the dependent variable in the monetary policy
rule, different detrending techniques to estimate the output gap, different
measures of long-run monetary policy rates and long-run fiscal balances,
different sets of instrumental variables, and different measures of country
risk.