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Transmission Mechanism and Inflation Targeting: The Case of Colombia's Desinflation

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  • Javier Gómez

    ()
    (Banco de la República)

  • Juan Manuel Julio

    ()
    (Banco de la República)

Abstract

Colombia has been on a steady disinflation path since the early 1990s. In this paper, we model the transmission mechanism of monetary policy during this disinflation. We describe how inflation evolves in response to important shocks that occurred during disinflation such as the terms of trade and to the risk premium, comparing the responses across different assumptions about inflation persistence. Disinflation itself is captured by a permanent shift to the inflation target. We evaluate to what extent a shift towards more forward-looking wage and price-setting mechanisms would determine the sacrifice ratio under disinflation.

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Bibliographic Info

Article provided by Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines in its journal Revista de Analisis Economico.

Volume (Year): 18 (2003)
Issue (Month): 2 (December)
Pages: 109-133

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Handle: RePEc:ila:anaeco:v:18:y:2003:i:2:p:109-133

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Keywords: transmission Mechanism of monetary policy; Inflation Targeting;

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References

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  1. Larry E. Jones & Rodolfo E. Manuelli, 1993. "Growth and the Effects of Inflation," NBER Working Papers 4523, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Andres Fernández, 2003. "Reformas Estructurales, Impacto Macroeconómico Y Política Monetaria En Colombia," DOCUMENTOS CEDE 003434, UNIVERSIDAD DE LOS ANDES-CEDE.
  2. Javier Gómez & José Darío Uribe & Hernando Vargas, 2002. "The Implementation Of Inflation Targeting In Colombia," BORRADORES DE ECONOMIA 003603, BANCO DE LA REPÚBLICA.
  3. Miguel Urrutia, . "UNA VISION ALTERNATIVA: La Política Monetaria y Cambiaria en la Ültima Década," Borradores de Economia 207, Banco de la Republica de Colombia.
  4. Andrés González G. & Franz Hamann, 2011. "Lack of Credibility, Inflation Persistence and Disinflation in Colombia," BORRADORES DE ECONOMIA 008737, BANCO DE LA REPÚBLICA.

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