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Central Bank Independence, Inflation and Uncertainty: The Case of Colombia


  • William Miles


Colombia undertook reform of its central bank in 1991, pushing it in the direction of greater independence. We find that this reform led to a significant decrease in the level of inflation, as well as inflation uncertainty, suggesting an increase in credibility. However, there has also been an increase in inflation persistence since reform. The lower mean but greater persistence of inflation indicates that central bank independence has shifted the Phillips curve inward but also flattened it, a result consistent with recent research for the Euro-zone and the United States. Finally, further analysis reveals that, in accordance with the Friedman-Ball hypothesis, higher inflation raises uncertainty in Colombia, but that uncertainty does not increase inflation.

Suggested Citation

  • William Miles, 2009. "Central Bank Independence, Inflation and Uncertainty: The Case of Colombia," International Economic Journal, Taylor & Francis Journals, vol. 23(1), pages 65-79.
  • Handle: RePEc:taf:intecj:v:23:y:2009:i:1:p:65-79
    DOI: 10.1080/10168730802696624

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    References listed on IDEAS

    1. Alex Cukierman, 1992. "Central Bank Strategy, Credibility, and Independence: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031981, January.
    2. Stephen G. Cecchetti & Guy Debelle, 2006. "Has the inflation process changed?," Economic Policy, CEPR;CES;MSH, vol. 21(46), pages 311-352, April.
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    Central bank independence; Colombia;


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