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Inflation Expectations and a Model-Based Core Inflation Measure in Colombia


  • Hernando Vargas-Herrera


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.

Suggested Citation

  • Hernando Vargas-Herrera, 2016. "Inflation Expectations and a Model-Based Core Inflation Measure in Colombia," Borradores de Economia 14264, Banco de la Republica.
  • Handle: RePEc:col:000094:014264

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    References listed on IDEAS

    1. 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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    4. 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 República, vol. 29(66), pages 222-245, December.
    5. 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.
    6. Pfajfar, Damjan & Santoro, Emiliano, 2010. "Heterogeneity, learning and information stickiness in inflation expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 75(3), pages 426-444, September.
    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.
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    Cited by:

    1. 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.
    2. Jose Vicente Romero & Sara Naranjo Saldarriaga, 2022. "Weather Shocks and Inflation Expectations in Semi-Structural Models," IHEID Working Papers 20-2022, Economics Section, The Graduate Institute of International Studies.

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    More about this item


    Inflation expectations; core inflation; supply shocks; monetary policy;
    All these keywords.

    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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