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The Rise And Perpetuation Of A Moderate Inflation, Colombia 1970-1991

  • Juan Carlos Echeverry G.


Colombian inflationary experience is explained using a theoretical model that stresses two elements: the effect of shocks and the type of policy designed to respond to them. The empirical investigation uses the event-study methodology and finds that the model successfully accounts for the main characteristics of the country's inflationary process; foreign exchange reserves, agricultural and policy shocks, as well as lack of commitment to low infaltion by the authorities are the main causes behind the sustained high/moderate level of inflation. As assessment of the costs of inflation and price variability, widely documented for other countries, is not found during the periods of high but stable inflation in Colombia.

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Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 003621.

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Length: 84
Date of creation: 30 Apr 1996
Date of revision:
Handle: RePEc:col:000094:003621
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  1. Fischer, Stanley & Summers, Lawrence H, 1989. "Should Governments Learn to Live with Inflation?," American Economic Review, American Economic Association, vol. 79(2), pages 382-87, May.
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  3. Christina D. Romer & David H. Romer, 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Working Papers 2966, National Bureau of Economic Research, Inc.
  4. Juan Manuel Julio, 1995. "Choques grandes / Choques pequeños: Evidencia del Log (IPC) e inflación colombianos," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, December.
  5. Carmen M. Reinhart. & Vicent R. Reinhart, 1991. "Fluctuaciones del producto y choques monetarios: evidencia colombiana," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 10(20), pages 53-85, Diciembre.
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  7. Kiseok Lee & Shawn Ni, 1995. "Inflation uncertainty and real economic activities," Applied Economics Letters, Taylor & Francis Journals, vol. 2(11), pages 460-462.
  8. Laurence Ball, 1990. "Why Does High Inflation Raise Inflation Uncertainty?," NBER Working Papers 3224, National Bureau of Economic Research, Inc.
  9. Cooley, T.F. & Hansen, G.D., 1991. "The Welfare Costs of Moderate Inflations," Papers 90-04, Rochester, Business - General.
  10. Ball, Laurence & Romer, David, 2003. " Inflation and the Informativeness of Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(2), pages 177-96, April.
  11. Laurence Ball, 1991. "The genesis of inflation and the costs of disinflation," Proceedings, Federal Reserve Bank of Cleveland, pages 439-461.
  12. Benabou, Roland & Gertner, Robert, 1993. "Search with Learning from Prices: Does Increased Inflationary Uncertainty Lead to Higher Markups?," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 69-94, January.
  13. Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
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  15. Kiguel, Miguel A & Liviatan, Nissan, 1992. "When Do Heterodox Stabilization Programs Work? Lessons from Experience," World Bank Research Observer, World Bank Group, vol. 7(1), pages 35-57, January.
  16. Alberto Carrasquilla, 1996. "Dimensiones Fiscales De Una Inflación Moderada: El Caso Colombiano," BORRADORES DE ECONOMIA 002357, BANCO DE LA REPÚBLICA.
  17. Martin Evans & Paul Wachtel, 1993. "Inflation regimes and the sources of inflation uncertainty," Proceedings, Federal Reserve Bank of Cleveland, pages 475-520.
  18. Natalia Salazar, 1992. "El efecto Tanzi, la sustitución de monedas y la tasa de inflación óptima en Colombia," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, June.
  19. Mariano Tommasi, 1993. "The Consequences of Price Instability on Search Markets," UCLA Economics Working Papers 700, UCLA Department of Economics.
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