A Level-Dependence Approach for Assessing De-Anchoring of Inflation Expectations: Evidence from Colombia

Jonathan Alexander Muñoz-Martínez

Borradores de Economia from Banco de la Republica de Colombia

Abstract: This study introduces a methodology for evaluating the de-anchoring of inflation expectations by proposing indicators to measure deviations in short- and long-term inflation expectations from the Central Bank's target, analyzing their dependency over time using traditional and hierarchical statistical copulas, the latter incorporating the effect of the monetary policy stance. Using data from the Colombian financial market, the findings reveal that during inflationary episodes (2008–2009, 2015–2016, and 2022–2023), the dependency between short- and long-term expectations increased, indicating de-anchoring. This pattern was also observed during periods when inflation was below the target (2013 and 2020). Conversely, in years such as 2006, 2010, 2014, 2017, and 2021, and towards the end of 2023, the decrease in this dependency suggests that expectations were anchoring. Additionally, when the monetary policy stance was considered, there was a strong negative dependency during contractionary episodes, while progressive interest rate reductions were associated with a positive dependency. *****RESUMEN: Este estudio introduce una metodología para evaluar el desanclaje de las expectativas de inflación proponiendo indicadores que miden desviaciones en las expectativas de inflación a corto y largo plazo respecto al objetivo del Banco Central, posteriormente, se analiza su dependencia a lo largo del tiempo utilizando cópulas estadísticas tradicionales y jerárquicas, estas últimas incorporando el efecto de la postura de la política monetaria. Utilizando datos del mercado financiero colombiano, los hallazgos revelan que durante episodios inflacionarios (2008–2009, 2015–2016 y 2022–2023), la dependencia entre las expectativas a corto y largo plazo aumentó, indicando desanclaje. Este patrón también se observó durante períodos en los que la inflación estuvo por debajo del objetivo (2013 y 2020). Por el contrario, en años como 2006, 2010, 2014, 2017 y 2021, y hacia finales de 2023, la disminución en esta dependencia sugiere que las expectativas estaban ancladas. Además, cuando se consideró la postura de la política monetaria, hubo una fuerte dependencia negativa durante episodios contractivos, mientras que las reducciones progresivas de la tasa de interés se asociaron con una dependencia positiva.

Keywords: De-anchoring; Expectations; Credibility; Monetary Policy; Desanclaje; Expectativas; Credibilidad; Política Monetaria. (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Pages: 36
Date: 2025-07
New Economics Papers: this item is included in nep-mon
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https://doi.org/10.32468/be.1322

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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:1322

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