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

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  • Javier Gómez

    ()

  • 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. Martha López, . "Seigniorage and the Welfare Cost of Inflation in Colombia," Borradores de Economia 151, Banco de la Republica de Colombia.
  2. Nicoletta Batini & Andrew G Haldane, 1999. "Forward-looking rules for monetary policy," Bank of England working papers 91, Bank of England.
  3. Bankim Chadha & Paul R. Masson & Guy Meredith, 1992. "Models of Inflation and the Costs of Disinflation," IMF Staff Papers, Palgrave Macmillan, vol. 39(2), pages 395-431, June.
  4. Rudiger Dornbusch & Stanley Fischer, 1992. "La inflación moderada," Economia Mexicana NUEVA EPOCA, , vol. 0(1), pages 5-70, January-J.
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  7. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
  8. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging-Market Countries," American Economic Review, American Economic Association, vol. 90(2), pages 105-109, May.
  9. Cooley, Thomas F & Hansen, Gary D, 1989. "The Inflation Tax in a Real Business Cycle Model," American Economic Review, American Economic Association, vol. 79(4), pages 733-48, September.
  10. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
  11. Laurence Ball, 1994. "What Determines the Sacrifice Ratio?," NBER Chapters, in: Monetary Policy, pages 155-193 National Bureau of Economic Research, Inc.
  12. V.V. Chari & Larry E. Jones & Rodolfo E. Manuelli, 1996. "Inflation, growth, and financial intermediation," Proceedings, Federal Reserve Bank of St. Louis, issue May, pages 41-58.
  13. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy Rules for Inflation Targeting," NBER Working Papers 6512, National Bureau of Economic Research, Inc.
  14. Jones, Larry E. & Manuelli, Rodolfo E., 1995. "Growth and the effects of inflation," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1405-1428, November.
  15. De Gregorio, Jose, 1993. "Inflation, taxation, and long-run growth," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 271-298, June.
  16. Svensson, Lars E.O., 1998. "Open-Economy Inflation Targeting," Seminar Papers 638, Stockholm University, Institute for International Economic Studies.
  17. Miguel A. Savastano & Paul R. Masson & Sunil Sharma, 1997. "The Scope for Inflation Targeting in Developing Countries," IMF Working Papers 97/130, International Monetary Fund.
  18. N. Gregory Mankiw, 1994. "Monetary Policy," NBER Books, National Bureau of Economic Research, Inc, number greg94-1, June.
  19. Imrohoroglu, Ayse, 1992. "The welfare cost of inflation under imperfect insurance," Journal of Economic Dynamics and Control, Elsevier, vol. 16(1), pages 79-91, January.
  20. repec:sae:niesru:v:145:y::i:1:p:43-63 is not listed on IDEAS
  21. Sjaastad, Larry A., 1998. "On exchange rates, nominal and real," Journal of International Money and Finance, Elsevier, vol. 17(3), pages 407-439, June.
  22. Esteban Jadresic, 1996. "Wage Indexation and the Cost of Disinflation," IMF Staff Papers, Palgrave Macmillan, vol. 43(4), pages 796-825, December.
  23. 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.
  24. Javier Gómez, . "Wage Indexation, Inflation Inertia, and the Cost of Disinflation," Borradores de Economia 198, Banco de la Republica de Colombia.
  25. Rudiger Dornbusch & Stanly Fischer, 1992. "Inflación moderada," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
  26. Robert J. Barro, 1996. "Inflation and growth," Review, Federal Reserve Bank of St. Louis, issue May, pages 153-169.
  27. Esteban Jadresic, 1996. "Wage Indexation and the Cost of Disinflation," IMF Working Papers 96/48, International Monetary Fund.
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Cited by:
  1. Andrés Gonzalez & Franz Hamann, 2011. "Lack of Credibility, Inflation Persistence and Disinflation in Colombia," REVISTA DESARROLLO Y SOCIEDAD, 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. Juan Manuel Julio, 2005. "Implementacion, Uso e Interpretación del FAN CHART," BORRADORES DE ECONOMIA 002815, BANCO DE LA REPÚBLICA.
  4. Miguel Urrutia, . "UNA VISION ALTERNATIVA: La Política Monetaria y Cambiaria en la Ültima Década," Borradores de Economia 207, Banco de la Republica de Colombia.
  5. Andres Fernández, 2003. "Reformas Estructurales, Impacto Macroeconómico Y Política Monetaria En Colombia," DOCUMENTOS CEDE 003434, UNIVERSIDAD DE LOS ANDES-CEDE.

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