Monetary policy transparency in Colombia

Juan Ospina-Tejeiro and José Romero

Borradores de Economia from Banco de la Republica de Colombia

Abstract: Transparency is often emphasized as a key element for central bank independence and the effectiveness of monetary policy. Between 2018 and 2019, the Central Bank of Colombia (Banco de la República) undertook a significant overhaul of its monetary decision-making process, which led to significant changes in how the bank works to design its monetary policy and communicate its outlook on the economy and its interest rate decisions to the public. This paper assesses how these changes may have impacted monetary transparency over time. To this end, we compute the Dincer-Eichengreen-Geraats (DEG) Transparency Index (Dinçer et al., 2019) and the Central Bank Transparency-Inflation Targeting (CBT-IT) Index (Al-Mashat et al., 2018) and find that the implemented changes led to an increase in monetary policy transparency, which, to a large degree, closed the gap with respect to the leading central banks with IT regimes and highest transparency ratings. RESUMEN: La transparencia es un elemento clave para la independencia de la banca central y la efectividad de la política monetaria. Entre 2018 y 2019, el Banco de la República emprendió una revisión significativa de su proceso de toma de decisiones monetarias, lo que condujo a cambios importantes en cómo se trabaja para diseñar la política monetaria y la forma en que se comunica y explica las perspectivas de la economía y las decisiones sobre las tasas de interés al público. Este documento evalúa cómo estos cambios han impactado la transparencia monetaria a lo largo del tiempo. Para ello, calculamos el Índice de Transparencia de Dincer-Eichengreen-Geraats (DEG) ( Dinçer et al., 2019) y el Índice de Transparencia para Bancos Centrales con Inflación Objetivo (CBT-IT) (Al-Mashat et al., 2018) y encontramos que los cambios implementados llevaron a un aumento en la transparencia de la política monetaria, que, en gran medida, cerró la brecha con respecto a los bancos centrales líderes con regímenes de inflación objetivo y las calificaciones más altas de transparencia.

Keywords: Monetary policy; Inflation targeting; Central bank transparency; Política monetaria; inflación objetivo; transparencia de la banca central (search for similar items in EconPapers)
JEL-codes: E0 E4 (search for similar items in EconPapers)
Pages: 37
Date: 2024-10
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
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https://doi.org/10.32468/be.1285

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