Abstract

ECHAVARRIA, Juan José; RODRIGUEZ, Norberto  and  ROJAS, Luis Eduardo. The Target of the Central Bank and Inflation Persistence in Colombia. Ens. polit. econ. [online]. 2011, vol.29, n.65, pp.198-222. ISSN 0120-4483.

In this document we estimate an econometric model which describes quarterly inflation by an unobserved component trend-cycle model, where the trend is probably induced by the target of the Central Bank. It shows that inflation persistencerose in Colombia between 1979-1989 and 1989-1999, and decreased to its lowest level in 1999-2010, thanks to the adoption of inflation targeting. The inflation gap shows low persistence, a result compatible with the Neo-Keynesian Phillips curve. The final part of the document evaluates inflation persistence for the different components of inflation used by the Central Bank to project inflation.

Keywords : Inflation; inflation persistence; regime change models; Central Bank target; Colombia.

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