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The Central Bank in Colombia

  • Alberto Alesina


  • Alberto Carrasquilla


  • Roberto Steiner


In the last decade the issue of the optimal degree of central bank independence has been at the center of attention of academics and policymakers in many countries. The direction of institutional reform has almost universally been toward making central banks more independent from political pressure. The motivation of this move is linked to an increased emphasis on price stability as the main or only goal of monetary policy after two decades of exceptionally high inflation rates. Colombia has made an effort in reforming a complex set of monetary institutions, which for over two decades delivered a persistent, moderate rate of inflation. The central bank reform -along with the elimination of many indexation practices, the liberalization of financial activity and the reduction of trade and capital account barriers- delivered substantial progress. This paper argues that a reduced set of "second generation" reforms aimed at correcting limitations that were maintained may further deepen these accomplishments. We propose to make the board of the bank smaller and to remove any members of the executive from it. An appropriate timing of appointments should also create stability in the board.

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Paper provided by FEDESARROLLO in its series WORKING PAPERS SERIES. DOCUMENTOS DE TRABAJO with number 002458.

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Length: 20
Date of creation: 31 Aug 2000
Date of revision:
Handle: RePEc:col:000123:002458
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  1. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging Market Countries," NBER Working Papers 7618, National Bureau of Economic Research, Inc.
  2. Juan C. Jaramillo & Roberto Steiner & Natalia Salazar, 1999. "The Political Economy of Exchange Rate Policy in Colombia," Research Department Publications 3064, Inter-American Development Bank, Research Department.
  3. Taylor, John B., 1983. "`Rules, discretion and reputation in a model of monetary policy' by Robert J. Barro and David B. Gordon," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 123-125.
  4. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510944, June.
  5. Alberto Alesina & Robert J. Barro, 2000. "Currency Unions," NBER Working Papers 7927, National Bureau of Economic Research, Inc.
  6. Taylor, John B., 1998. "The Robustness and Efficiency of Monetary Policy Rules as Guidelines for Interest Rate Setting by the European Central Bank," Seminar Papers 649, Stockholm University, Institute for International Economic Studies.
  7. John B. Taylor, 1998. "An Historical Analysis of Monetary Policy Rules," NBER Working Papers 6768, National Bureau of Economic Research, Inc.
  8. Kugler, Maurice & Rosenthal, Howard, 2000. "Checks and balances: an assessment of the institutional separation of political powers in Colombia," Discussion Paper Series In Economics And Econometrics 0018, Economics Division, School of Social Sciences, University of Southampton.
  9. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, July.
  10. John B. Taylor, 1999. "Introduction to "Monetary Policy Rules"," NBER Chapters, in: Monetary Policy Rules, pages 1-14 National Bureau of Economic Research, Inc.
  11. Alex Cukierman, 1992. "Central Bank Strategy, Credibility, and Independence: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031981, June.
  12. Christopher J. Waller, 2000. "Policy Boards And Policy Smoothing," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 305-339, February.
  13. Robert J. Barro & David B. Gordon, 1983. "Rules, Discretion and Reputation in a Model of Monetary Policy," NBER Working Papers 1079, National Bureau of Economic Research, Inc.
  14. Ernesto H. Stein & Jeffry Frieden, 2000. "The Political Economy of Exchange Rate Policy in Latin America: An Analytical Overview," Research Department Publications 3118, Inter-American Development Bank, Research Department.
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