The Dilemma between Price Stabilization and Full Employment in Colombian Economic Policy: Some Contributions to the Debate

Mario Eduardo Hidalgo-Villota ()
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Mario Eduardo Hidalgo-Villota: Universidad de Nariño

Lecturas de Economía, 2024, issue 102, 271-301

Abstract: This article contributes theoretical and empirical elements to the debate on the supposed supremacy of the inflation targeting strategy in Colombia to ensure the maintenance of the purchasing power of the currency. In the fulfillment of this constitutional mandate, Banco de la República is held responsible for the lower economic growth and, consequently, for the loss of employment. Based on the analysis of Colombia's system of national accounts and DANE labor statistics, as well as the databases of the Center for Growth and Development of the University of Groningen (Netherlands) and the World Penn Table 10.0, empirical evidence is provided in favor of the thesis that premature deindustrialization, together with the boom in trade and services and the effects of accelerated trade liberalization in 1990, have reduced the economy's capacity to generate more jobs. The unemployment sacrifice ratio calculated for Colombia indicates that the stabilization measures have been successful, as inflation was reduced by one percentage point, reducing unemployment by 0.12%. This coefficient represents the cost in percentage points of additional unemployment for each percentage point reduction in inflation.

Keywords: policy coordination; stabilization; inflation; full employment; monetary policy (search for similar items in EconPapers)
JEL-codes: E5 E52 E58 E61 E63 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.17533/udea.le.n102a352317

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