Monetary and Exchange Rate Policies in Colombia: Progress and Challenges
September 1, 2004
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Summary
This paper focuses on monetary and exchange rate policies in Colombia, with particular emphasis on the period 1999-2002, when flotation of the peso and inflation targeting were adopted. We argue, first, in favor of adopting "operational inflation target ranges" and, second, in favor of strengthening the current scheme of foreign exchange options. The impact of reductions in the reference rates of the Central Bank of Colombia is also assessed. We find that a lower central bank policy interest rate is likely to affect demand only if mortgage refinancing takes place. We present preliminary estimates of Taylor rules in an openeconomy framework for Colombia.
Subject: Banking, Financial services, Inflation, Inflation targeting, Monetary aggregates, Monetary policy, Money, Prices, Real interest rates, Repo rates
Keywords: aggregate demand, BR mandate, central bank reaction, Colombia, discount window, exchange rate, Exchange rate policies, Fed model, Global, Inflation, Inflation targeting, Monetary aggregates, Monetary policies, monetary policy rule, New York Fed chairman, open economy, output gap, reaction function, Real interest rates, Repo rates, Southeast Asia, transmission mechanism, WP
Pages:
28
Volume:
2004
DOI:
Issue:
166
Series:
Working Paper No. 2004/166
Stock No:
WPIEA1662004
ISBN:
9781451858136
ISSN:
1018-5941
