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An Optimal Taylor Rule for Colombia, 1991-2006

  • Remberto Rhenals

    ()

    (Facultad de Ciencias Económicas - Universidad de Antioquia)

  • Juan Pablo Saldarriaga

    ()

    (Facultad de Ciencias Económicas y Administrativas de la Universidad Católica Popular de Risaralda)

In this article, an open-economy optimal monetary rule is estimated for Colombia over the period 1991-2006 using the Generalized Method of Moments (GMM). The results show that in 1991-1999 the monetary authorities had two targets: one for the inflation rate and another for the exchange rate. In contrast, the exchange rate did not seem to be a concern for the monetary authorities during 2000-2006, or at least they did not use the interest rate to address such a goal. The output gap is statistically significant in both sub-periods, but the magnitude of its coefficient is practically negligible.

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Article provided by Universidad de Antioquia, Departamento de Economía in its journal LECTURAS DE ECONOMÍA.

Volume (Year): (2008)
Issue (Month): 69 (Julio-Diciembre)
Pages: 9-39

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Handle: RePEc:lde:journl:y:2008:i:69:p:9-39
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