4  BIS Review 68/2007  The figure also depicts the estimated average efficiency frontier of MP for emerging economies after IT adoption, for the period of stationary inflation targets (blue line) and the observed pair of output and inflation volatilities (green dot). On one hand, the shift of the efficiency frontier toward the origin reflects the smaller shocks faced by emerging economies since they have had stationary IT in place. On the other hand, the observed combination of output and inflation volatilities has moved closer to the efficiency frontier, revealing the corresponding improvement in monetary policy efficiency. In this case, the smaller shocks explain 58% of the current performance, while the improvements in monetary policy explain 42% of the decline in volatilities. Chile also records massive improvements in monetary policy management. Not only does Chile face smaller shocks, as reflected by the inward shift of the MP efficiency frontier, but also MP efficiency has improved significantly, as reflected by the closer position of observed volatilities to the efficiency frontier (see figure 12). Contribution of central bank policy to macroeconomic stability Emerging economies have improved MP practices. However, the contribution of monetary policy to macroeconomic performance still is low. The annual Report on Competitiveness prepared by the Institute for Management Development (IMD) shows that the positions of emerging economies in the country ranking of the contribution of central bank policy to development has not changed significantly since 1998. However, Chile has recorded major improvements during the past decade.
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