Lack of Credibility, Inflation Persistence and Disinflation in Colombia
Bibliographic Data
| ID | 6166691 |
|---|---|
| Authors | Andrés González G (Banco de la República Colombia), Franz Hamann (0000-0002-4394-4680, Banco de la República Colombia) |
| Year | 2011 |
| Issue | 67 |
| Pages | 61-97 |
| Publication date | 2011-01-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Revista Desarrollo y Sociedad (JOURNAL) |
| Journal identifiers | ISSN: 0120-3584 • E-ISSN: 1900-7760 |
| Publisher | Universidad de los Andes (PUBLISHER • VE) |
| DOI | 10.13043/dys.67.2 |
| OpenAlex | W2128605549 |
| Language | EN |
| References cited | 4 |
This paper measures inflation persistence in Colombia for the period 1990-2010 and estimates the implied speed at which agents learn about the central bank’s inflation target. We estimate Erceg and Levin’s (2003) imperfect credibility model using Bayesian techniques and compare the posterior odds of this model against a conventional Neokeynesian model with ad-hocprice indexation. The odds are strongly in favor of the imperfect credibility model, suggesting that lack of credibility on the inflation target is an important source of inflation persistence. We use the model to compute the sacrifice ratio associated to 100 basis points inflation target shocks and find that it is (0.83%) in line with previous estimates for Colombia. We also find that the speed at which agents learn in the model has increased, albeit marginally, since the central bank implemented its inflation targeting strategy. Although during this period macroeconomic volatility has fallen, inflation persistence has remained roughly constant suggesting that, so far, the impact of those credibility gains on inflation persistence has been modest
Bayesian probability · Credibility · Disinflation · Econometrics · Economics · Imperfect · Indexation · Inflation (cosmology · Inflation targeting · Logistic regression · Macroeconomics · Monetary economics · Monetary policy · Odds · Persistence (discontinuity · Real interest rate · Statistics · Volatility (finance · Global Financial Crisis and Policies · Market Dynamics and Volatility · Mathematics · Monetary Policy and Economic Impact
| Highly cited | No |
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