Modelling the monetary policy reaction function of the Colombian Central Bank

Jesus Otero and Manuel Ramirez

Macroeconomics and Finance in Emerging Market Economies, 2009, vol. 2, issue 1, 3-11

Abstract: This paper proposes a simple ordered probit model to analyse the monetary policy reaction function of the Colombian Central Bank. There is evidence that the reaction function is asymmetric, in the sense that the Bank increases the Bank rate when the gap between observed inflation and the inflation target (lagged once) is positive, but it does not reduce the Bank rate when the gap is negative. This behaviour suggests that the Bank is more interested in fulfilling the announced inflation target rather than in reducing inflation excessively. The forecasting performance of the model, both within and beyond the estimation period, appears to be particularly good.

Keywords: monetary policy reaction function; ordered probit model; Central Bank independence; Colombia (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/17520840902726193 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Modeling the monetary policy reaction function of the colombian central bank (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:macfem:v:2:y:2009:i:1:p:3-11

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/REME20

DOI: 10.1080/17520840902726193

Access Statistics for this article

Macroeconomics and Finance in Emerging Market Economies is currently edited by Subrata Sarkar and Ashima Goyal

More articles in Macroeconomics and Finance in Emerging Market Economies from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().