Commodity price shocks and inflation within an optimal monetary policy framework: the case of Colombia
Luis Arango Thomas (),
Ximena Chavarro and
BORRADORES DE ECONOMIA from BANCO DE LA REPÚBLICA
A small open macroeconomic model, in which an optimal interest rate rule emerges to drive the inflation behavior, is used to model inflation within an inflation targeting framework. This set up is used to estimate the relationship between commodity prices shocks and the inflation process in a country that both export and import commodities. We found evidence of a positive, yet small, impact from food international price shocks to inflation. However, these effects are no longer observable once the sample is split in the periods before and after the boom. The lack of effect from oil and energy price shocks we obtain supports the recent findings in the literature of a substantial decrease in the pass-through from oil prices to headline inflation. Thus, our interpretation is that monetary authority has faced rightly the shocks to commodity prices. Inflation expectations are the main determinant of inflation during the inflation targeting regime. Commodity prices movements are to a great extent included in the information set to form expectations.
Keywords: Commodity prices; inflation-targeting regime; optimal monetary policy; expectations. (search for similar items in EconPapers)
JEL-codes: E43 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-lam, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://www.banrep.gov.co/sites/default/files/publicaciones/archivos/be_858.pdf [301 Moved Permanently]--> https://www.banrep.gov.co/sites/default/files/publicaciones/archivos/be_858.pdf)
Working Paper: Commodity price shocks and inflation within an optimal monetary policy framework: the case of Colombia (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:col:000094:012380
Access Statistics for this paper
More papers in BORRADORES DE ECONOMIA from BANCO DE LA REPÚBLICA
Bibliographic data for series maintained by Clorith Angélica Bahos Olivera ().