Modelling the monetary policy reaction function of the Colombian Central Bank
This paper proposes a simple ordered probit model to analyse the monetary policy reaction function of the Colombian Central Bank. There is evidence that the reaction function is asymmetric, in the sense that the Bank increases the Bank rate when the gap between observed inflation and the inflation target (lagged once) is positive, but it does not reduce the Bank rate when the gap is negative. This behaviour suggests that the Bank is more interested in fulfilling the announced inflation target rather than in reducing inflation excessively. The forecasting performance of the model, both within and beyond the estimation period, appears to be particularly good.
Volume (Year): 2 (2009)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/REME20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/REME20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dolado, Juan J. & Maria-Dolores, Ramon & Naveira, Manuel, 2005. "Are monetary-policy reaction functions asymmetric?: The role of nonlinearity in the Phillips curve," European Economic Review, Elsevier, vol. 49(2), pages 485-503, February.
- Lars E.O. Svensson, 1998.
"Inflation Targeting as a Monetary Policy Rule,"
NBER Working Papers
6790, National Bureau of Economic Research, Inc.
- Svensson, Lars E O, 1998. "Inflation Targeting as a Monetary Policy Rule," CEPR Discussion Papers 1998, C.E.P.R. Discussion Papers.
- Svensson, Lars E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Seminar Papers 646, Stockholm University, Institute for International Economic Studies.
- Svensson, Lars E. O., 1998. "Inflation targeting as a monetary policy rule," CFS Working Paper Series 1998/16, Center for Financial Studies (CFS).
- Svensson, L.E.O., 1998. "Inflation Targeting as a Monetary Policy Rule," Papers 646, Stockholm - International Economic Studies.
- Choi, Woon Gyu, 1999. "Estimating the Discount Rate Policy Reaction Function of the Monetary Authority," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(4), pages 379-401, July-Aug..
- Carstensen, Kai, 2006.
"Estimating the ECB policy reaction function,"
Munich Reprints in Economics
19941, University of Munich, Department of Economics.
- John Williamson, 1996. "Crawling Band as an Exchange Rate Regime: Lessons from Chile, Colombia and Israel, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 14, January.
- Eichengreen, Barry & Watson, Mark W & Grossman, Richard S, 1985. "Bank Rate Policy under the Interwar Gold Standard: A Dynamic Probit Model," Economic Journal, Royal Economic Society, vol. 95(379), pages 725-45, September.
- Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
When requesting a correction, please mention this item's handle: RePEc:taf:macfem:v:2:y:2009:i:1:p:3-11. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.