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The Implementation Of Inflation Targeting In Colombia

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Author Info

  • Javier Gómez

    ()

  • José Darío Uribe

    ()

  • Hernando Vargas

    ()

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    Abstract

    Explicit inflation targets have existed in Colombia since the early nineties1 . The Colombian authorities announced a quantitative in‡ation target for the first time in 1991. The announcement was made by the Minister of Finance, at a time when there was no clear distinction between the tasks of the central bank and those of the government with respect to macroeconomic management, nor there was any autonomy in the design and execution of monetary policy. In 1991, a new Constitution assigned the design and conduct of monetary, exchange, and credit policies exclusively to the Board of Directors of Banco de la República and made the central bank independent from the central government. According to the Constitution, ”The State, through Banco de la República must preserve the purchasing power of currency”. In addition to the constitutional mandate, in 1992 the Central Bank Law stated that the Board of Directors must announce each year a quantitative inflation target. The reduction of inflation in Colombia has faced several hurdles. To begin, the introduction of explicit inflation targets in Colombia had two special features. First, unlike other countries, the inflation target was not initially announced as part of a policy framework to achieve price stability. Second, there was a marked deviation between observed inflation and the first announced target. Thus, inflation targeting in Colombia started with low credibility and confusion about its nature and operational meaning.

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    Bibliographic Info

    Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 003603.

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    Length: 62
    Date of creation: 31 Mar 2002
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    Handle: RePEc:col:000094:003603

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    1. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging Market Countries," NBER Working Papers 7618, National Bureau of Economic Research, Inc.
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    3. Enrique López E. & Martha Misas A., 1999. "Un Examen Empirico De La Curva De Phillips En Colombia," BORRADORES DE ECONOMIA 003676, BANCO DE LA REPÚBLICA.
    4. Martha López, 2001. "Seigniorage And The Welfare Cost Of Inflation In Colombia," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
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    9. Mahadeva, Lavan & Sterne, Gabriel, 2002. "Inflation Targets as a Stabilization Device," Manchester School, University of Manchester, vol. 70(4), pages 619-50, Special I.
    10. Tarkka, Juha & Mayes, David, 1999. "The Value of Publishing Official Central Bank Forecasts," Research Discussion Papers 22/1999, Bank of Finland.
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    18. Esteban Jadresic, 1996. "Wage Indexation and the Cost of Disinflation," IMF Staff Papers, Palgrave Macmillan, vol. 43(4), pages 796-825, December.
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