Monetary policy

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Policy Analysis Tool Applied to Colombian Needs: PATACON Model Description

In this document we lay out the microeconomic foundations of a dynamic stochastic general equilibrium model designed to forecast and to advice monetary policy authorities in Colombia. The model is called Policy Analysis Tool Applied to Colombian Needs (PATACON). In companion documents we present...

Policy Analysis Tool Applied to Colombian Needs: Patacon Model Description

In this document we lay out the microeconomic foundations of a dynamic stochastic general equilibrium model, called Policy Analysis Tool Applied to Colombian Needs (PATACON), designed as a forecast tool and as a guide to advise monetary policy authorities in Colombia. In companion documents we...

New Keynesian NAIRU and the Okun Law: An application for Colombia

This paper proposes new monthly estimates for the non-accelerating inflation rate of unemployment (NAIRU) and the output gap for Colombia. These rely on a New Keynesian small open economy model following González et al (2013), augmented by an Okun’s Law equation. The resulting output gap closely...

Monetary Policy Rules in a Search Model of the Labor Market

This paper studies the performance, in terms of volatility and welfare, of different monetary policy rules in an economy with two market frictions. We consider a financial friction that highlights the credit channel as the monetary transmission mechanism and a labor friction, that considerably...

Monetary policy implications for an oil-exporting economy of lower long-run international oil prices

The sudden collapse of oil prices poses a challenge to inflation targeting central banks in oil exporting economies. This paper illustrates that challenge and conducts a quantitative assessment of the impact of permanent changes in oil prices in a small and open economy, in which oil represents...

Monetary Policy Forecasting in a DSGE Model with Data that is Uncertain, Unbalanced and About the Future

 If theory-consistent models can ever hope to forecast well and to be useful for policy, they have to relate to data which though rich in information is uncertain, unbalanced and sometimes forecasts from external sources about the future path of other variables. One example from many is...

Monetary Policy and Commodity Prices: an endogenous analysis using an SVAR approach

This work analyzes the relationship between real interest rates and commodity prices. According to Frankel’s hypothesis (1986-2006): “low real interest rates lead to high real commodity prices”. However, some empirical evidence suggests that commodity prices can predict monetary policy. In this...

Interest Rate Setting and the Colombian Monetary Transmission Mechanism

 

Inflation Targeting in Colombia, 2002-2012

After decades using monetary aggregates as the main instrument of monetary policy and having different varieties of crawling peg exchange rate regimes, Colombia adopted a full-fledged inflation-targeting (IT) regime in 1999, with inflation as the nominal anchor, a floating exchange rate, and the...

Inflation Expectations and a Model-Based Core Inflation Measure in Colombia

Inflation expectations in Colombia are characterized. Empirical evidence following conventional tests suggests that they might not be rational, although the period of disinflation included in the sample makes it difficult to ascertain this conclusion. Inflation expectations display close ties...

Identifying central bank liquidity super-spreaders in interbank funds networks

Evidence suggests that the Colombian interbank funds market is an inhomogeneous and hierarchical network in which a few financial institutions fulfill the role of “super-spreaders” of central bank liquidity among market participants. Results concur with evidence from other interbank markets and...

House Prices and Monetary Policy in Colombia

This paper investigates the possible responses of an inflation-targeting monetary policy in the face of asset price deviations from fundamental values.

Foreign Exchange Intervention in Colombia

Banco de la República’s FX intervention policy is described, with a focus on its objectives and main features. Then, based on a survey of the effectiveness of sterilized intervention in Colombia, it is argued that this tool is not useful to cope with the challenges posed by medium term external...

Financial Intermediation and Monetary Policy in a Small Open Economy

This paper analyses the role of a costly financial system in the transmission of monetary policy. The new-keynesian model for a small open economy is extended with a simple financial system based on Hamann and Oviedo (2006). The presence of the financial intermediation naturally allows the...

Finance neutral potential output: an evaluation on an emerging market monetary policy context

In this paper output gaps that include financial cycle information are evaluated against models used in policy analysis by the Colombian central bank. Employing this dataset is no trivial matter, since policy related models are the only relevant yardstick, and emerging economies (such as...

Economic Sectors and the Risk-taking Channel of Monetary Policy

 

The opinions contained in this document are the sole responsibility of the author and do not commit Banco de la República or its Board of Directors.

 

Constant-Interest-Rate Projections and Its Indicator Properties

This paper propose indicator variables for the implementation of monetary policy in an inflation targeting regime. Using constant interest rate projections, the notion of a target-compatible interest rate is presented. This variable allows to extract some characteristics that the expected future...

Asset Price Bubbles and Monetary Policy in a Small Open Economy

In this paper we expanded the closed economy model by Bernanke and Gertler (1999) in order to account for the macroeconomic effects of an asset price bubble in the context of a small open economy model. During the nineties emerging market economies opened their financial accounts to foreign...

Asset Price bubbles and monetary policy in a small open economy

In this paper we expanded the closed economy model by Bernanke and Gertler (1999) in order to account for the macroeconomic effects of an asset price bubble in the context of a small open economy model. During the nineties emerging market economies opened their financial accounts to foreign...

Assessing Inflationary Pressures in Colombia

The assessment of inflationary pressures in Colombia has faced two important challenges in the present decade. The first one occurred in 2006 and consisted of detecting an overheating economy in the midst of fast growing investment and increasing measured productivity. The second challenge took...

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