This study updates the 4GM model used by Banco de la República (the Central Bank of Colombia) for monetary policy analysis. The update explicitly incorporates labor‑market dynamics, including the evolution of the unemployment rate and wages. The aim is to capture how…
Inflation
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- Publicación |Approach
- Publicación |When weather shocks are persistent --As in the extreme scenario-- they generate more lasting inflationary pressures that justify more restrictive monetary policy responses, albeit with higher costs in terms of economic activity.
- Publicación |The results highlight the usefulness of combining machine learning techniques with alternative sources of information to generate timely forecasts that are comparable to those of the market.
- Publicación |Banco de la República (the Central Bank of Colombia) implemented pilot surveys and, in 2023, conducted a nationally representative survey of the adult population. This revealed important data, such as that 95% of Colombians have heard of the Bank, but only 44.6% identify it as responsible for…
- Publicación |The necessary effort to stabilize inflation is greater when credibility is low, requiring the implementation of stricter policies than usual to achieve the same inflation targets.
- Publicación |Gran parte de la población carece de las herramientas fundamentales para tomar decisiones económicas y financieras adecuadas, lo cual es crucial para mejorar su bienestar y protegerse frente a choques económicos o inflacionarios.
- Publicación |Abstract
We use Long Short Term Memory (LSTM) neural networks, a deep learning technique, to forecast Colombian headline inflation one year ahead through two approaches. The first one uses only information from the target variable, while the second one incorporates additional information from…
- Publicación |Abstract
Colombia is particularly affected by the El Niño Southern Oscillation (ENSO) weather fluctuations. In this context, this study explores how the adverse weather events linked to ENSO affect the inflation expectations in Colombia and how to incorporate these second-round effects into a…
- Publicación |Approach
At the end of each year, Colombia follows a negotiation protocol that leads to an increase in the minimum wage either by agreement between the parties or, in the absence of such agreement, by government decision. Despite evidence of its adverse effects on the labor market (formal…
- Publicación |Abstract
The covid-19 pandemic distorted the pattern of household consumption. Consequently, the official fixed basket CPI could be measuring inaccurately the evolution of inflation. The exercise presented in this document, was to update the weighting structure of the basket with alternative…
- Publicación |Abstract This document offers an exercise that quantifies on the Colombia CPI the maximum possible impact in accounting terms of some price reliefs decreed by the national government. This impact would not necessarily coincide with the official CPI figures, due to the presence of multiple…
- Publicación |Abstract
This paper proposes an update of the CPI disaggregations that Banco de la República implements and analyzes regularly. This new classification contributes to the timely identification of different inflationary pressures, it stands in accordance with international practices, it…
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An application of Bayesian Model Averaging, BMA, is implemented to construct combined forecasts for the colombian inflation for the short and medium run. A model selection algorithm is applied over a set of linear models with a large dataset of potencial predictors using marginal as well as…
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The world economy has recently been hit by commodity price fluctuations, with first round effects on noncore inflation and second round effects on core inflation. The policy response to commodity price fluctuations depends on the first and second round effects as well as on the strength of the…
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The study evaluates the virtues of asymmetric trimmed means as efficient estimators of inflation for Colombia, an economy with high and variable inflation rates. Results suggest that the proposed indicators are more efficient than alternative indexes and are particularly suited for environments…
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Colombian inflationary experience is explained using a theoretical model that stresses two elements: the effect of shocks and the type of policy designed to respond to them. The empirical investigation uses the event-study methodology and finds that the model successfully accounts for the main…
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We compute both seigniorage rate and welfare cost of inflation rate in Colombia using a Sidrauski-type model in which preferences are separable functions of the service flows of non-durable goods and money holdings. The set of the estimated parameters imply…
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Some evidence of smooth transition Some evidence of smooth transitíons nonlinearity in Colombian inflation
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In a small macroeconomic model of the Colombian economy I investigate the problem of selecting a policy rule that is consistent with inflation targeting. I spell out the characteristics of the optimal feedback and output parameters in the rule, as well as for the optimal forecasting horizon for…
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