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On the determinants of the inflation rate in Colombia: a disequilibrium market approach

Jesus Otero () and Manuel Ramirez

Borradores de Investigación from Universidad del Rosario

Abstract: We investigate the inflation rate in Colombia in terms of excess money, excess demand, deviations from PPP, and wage inflation. In contrast to previous results for a group of industrial economias, we find that domestic factors are a far more powerful influence on inflation than are external factors. We also find evidence of non-linear price behavior in response to excess demand and deviations from PPP; prices appear to respond symmetrically to excess money. The constitutional reform of 1991, which gave greater political independence to the Central Bank, also did influence inflation, both changing some parameters of the model and the adjustment patterns. ************************************************************************ Se investiga la tasa de inflación en términos del exceso de dinero, el exceso de demanda, de las desviaciones con respecto a la PPa y de la inflación salarial. A diferencia de los resultados encontrados para un grupo de países industrializados, encontramos que los factores domésticos tienen una influencia mucho mayor sobre la inflación que los factores externos. Tambien encontramos evidencia de comportamiento no lineal de los precios en respuesta a los excesos de demanda y a las desviaciones con respecto a la PPA; los precios responden simétricamente al exceso de dinero. La reforma constitucional de 1991 incrementó la independencia del Banco Central, tambien influenció la inflación, pero por medio de cambios en los parámetros y en los patrones de ajuste.

Keywords: Inflation; cointegration; non-linearities; excess money; excess demand; imported inflation; wage inflation; Colombia (search for similar items in EconPapers)
JEL-codes: C32 C51 E31 O54 (search for similar items in EconPapers)
Date: 2002-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:col:000091:003296

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