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Inflation expectations and a model-based core inflation measure in Colombia

In: Inflation mechanisms, expectations and monetary policy

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  • Hernando Vargas-Herrera

    (Bank of the Republic)

Abstract

Inflation expectations in Colombia are characterized. Empirical evidence following conventional tests suggests that they might not be rational, although the period of disinflation included in the sample makes it difficult to ascertain this conclusion. Inflation expectations display close ties with observed past and present headline inflation and are affected by exogenous shocks in a possibly non-linear way. A model-based core inflation measure is computed that addresses the shortcomings of traditional exclusion measures when temporary supply shocks have widespread effects and are persistent.
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Suggested Citation

  • Hernando Vargas-Herrera, 2016. "Inflation expectations and a model-based core inflation measure in Colombia," BIS Papers chapters, in: Bank for International Settlements (ed.), Inflation mechanisms, expectations and monetary policy, volume 89, pages 123-151, Bank for International Settlements.
    • Handle: RePEc:bis:bisbpc:89-09
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    References listed on IDEAS

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    1. Ece Oral & Hülya Saygili & Mesut Saygili & S. Özge Tuncel, 2011. "Inflation Expectations in Turkey: Evidence from Panel Data," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2011(1), pages 5-28.
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    4. Andrés Gonzalez & Franz Hamann, 2011. "Lack of Credibility, Inflation Persistence and Disinflation in Colombia," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, May.
    5. Andrés González & Lavan Mahadeva & Juan D. Prada & Diego Rodríguez, 2011. "Policy Analysis Tool Applied to Colombian Needs: Patacon Model Description," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 29(66), pages 222-245, December.
    6. Friedrich Heinemann & Katrin Ullrich, 2006. "The Impact of EMU on Inflation Expectations," Open Economies Review, Springer, vol. 17(2), pages 175-195, April.
    7. Jesús Bejarano & Franz Hamann & Diego Rodríguez, 2016. "Indicador de Inflación Básica a partir de un Modelo Semi-estructural con inflación de alimentos," Borradores de Economia 935, Banco de la Republica de Colombia.
    8. Andolfatto, David & Hendry, Scott & Moran, Kevin, 2008. "Are inflation expectations rational?," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 406-422, March.
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    Cited by:

    1. José Vicente Romero & Sara Naranjo-Saldarriaga, 2022. "Weather Shocks and Inflation Expectations in Semi-Structural Models," Borradores de Economia 1218, Banco de la Republica de Colombia.
    2. Iregui, Ana María & Núñez, Héctor M. & Otero, Jesús, 2021. "Testing the efficiency of inflation and exchange rate forecast revisions in a changing economic environment," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 290-314.

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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