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Transmission Mechanism And Inflation Targeting: The Cese Of Colombia'S Disinflation

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  • Javier Gómez

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  • Juan Manuel Julio

    ()

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 judge to what extent a shift towards a more forward-looking wage and price-setting determines the sacrifice ratio under disinflation.

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Bibliographic Info

Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 003656.

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Length: 31
Date of creation: 31 Jan 2001
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Handle: RePEc:col:000094:003656

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  1. Rudebusch, G.D. & Svensson, L.E.O., 1998. "Policy Rules for Inflation Targeting," Papers 637, Stockholm - International Economic Studies.
  2. Esteban Jadresic, 1996. "Wage Indexation and the Cost of Disinflation," IMF Working Papers 96/48, International Monetary Fund.
  3. Nicoletta Batini & Andrew Haldane, 1999. "Forward-Looking Rules for Monetary Policy," NBER Chapters, in: Monetary Policy Rules, pages 157-202 National Bureau of Economic Research, Inc.
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  6. Laurence Ball, 1993. "What determines the sacrifice ratio?," Working Papers 93-21, Federal Reserve Bank of Philadelphia.
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  9. Svensson, Lars E O, 1998. "Open-Economy Inflation Targeting," CEPR Discussion Papers 1989, C.E.P.R. Discussion Papers.
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  19. Leonardo Villar & Hernán Rincón, 2000. "The Colombian Economy In The Nineties: Capital Flows And Foreign Exchange Regimes," BORRADORES DE ECONOMIA 003575, BANCO DE LA REPÚBLICA.
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Cited by:
  1. Fernández Andrés, 2003. "Reformas estructurales, impacto macroeconómico y política monetaria en Colombia," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.
  2. Andrés González & Franz Hamann, . "Lack of Credibility, Inflation Persistence and Disinflation in Colombia," Borradores de Economia 658, Banco de la Republica de Colombia.
  3. Juan Manuel Julio, 2005. "Implementacion, Uso e Interpretación del FAN CHART," BORRADORES DE ECONOMIA 002815, BANCO DE LA REPÚBLICA.
  4. Miguel Urrutia, 2002. "UNA VISIÓN ALTERNATIVA: La Política Monetaria y Cambiaria en la Última Década," BORRADORES DE ECONOMIA 003731, BANCO DE LA REPÚBLICA.
  5. Javier Gómez & José Darío Uribe & Hernando Vargas, 2002. "The Implementation Of Inflation Targeting In Colombia," BORRADORES DE ECONOMIA 003603, BANCO DE LA REPÚBLICA.

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