Abstract

GIL-LEON, José Mauricio  and  CELY-ACERO, Juan Pablo. Price Dynamics in the Departments of Colombia: Estimation of the Neo-Keynesian Phillips Curve. Lect. Econ. [online]. 2022, n.97, pp.11-43.  Epub Oct 11, 2022. ISSN 0120-2596.  https://doi.org/10.17533/udea.le.n97a344963.

This paper explains the dynamics of inflation in the departmental departments of Colombia between 2009-2019, estimating the Neo Keynesian Phillips curve (NKPC). There are differences in the formation of inflation and evidence that the NKPC allows describing a low probability of changes in prices for departments, mainly in the central zone of the country. The estimated coefficients support the importance of expected inflation on price formation, and less importantly the role of lagged inflation (persistence of inflation). This persistence of inflation is a reflection of structural rigidities, which reduce the ability of firms in one department to modify their prices in relation to others. These differences in the processes that determine the dynamics of inflation between departments have important implications for the conduct of monetary policy in Colombia.

Keywords : Neo Keynesian Phillips curve; departmental inflation; sticky prices; generalized method of moments.

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