{
  "title": "Explaining Inflation in Colombia: A Disaggregated Phillips Curve Approach",
  "publication": "IMF Working Papers, May 10, 2018",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2018/05/10/explaining-inflation-in-colombia-a-disaggregated-phillips-curve-approach-45850",
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  "summary": "We study inflation dynamics in Colombia using a bottom-up Phillips curve approach. This allows us to capture the different drivers of individual inflation components. We find that the Phillips curve is relatively flat in Colombia but steeper than recent estimates for the U.S.",
  "sections": [
    {
      "heading": "Main findings",
      "content": "- The study uses a bottom-up Phillips curve approach to capture drivers of individual inflation components.\n- The Phillips curve is relatively flat in Colombia but steeper than recent estimates for the U.S.\n- Supply side shocks play an important role for tradable and food prices.\n- Indexation dynamics are important for non-tradable goods.\n- The bottom-up approach improves on an aggregate Phillips curve in terms of forecasting ability.\n- In the baseline forecast scenario, both headline and core inflation converge towards the Central Bank’s inflation target of 3 percent by end-2018.\n- These favorable inflation dynamics are vulnerable to large supply shocks."
    },
    {
      "heading": "Methodology and scope",
      "content": "- Approach: bottom-up (disaggregated) Phillips curve estimation to analyze individual inflation components.\n- Focus areas: tradable inflation, food inflation, non-tradable goods inflation, indexation dynamics, supply side shocks, output gap effects, inflation expectations."
    },
    {
      "heading": "Forecasts, scenarios, and vulnerabilities",
      "content": "- Baseline forecast outcome: headline and core inflation converge to 3 percent by end-2018.\n- Vulnerability highlighted: large supply shocks can derail convergence implied by the baseline forecast."
    },
    {
      "heading": "Policy-relevant implications",
      "content": "- Disaggregated modeling provides a more detailed understanding of inflation drivers than aggregate Phillips curve models and yields improved forecasting ability.\n- Attention to supply side developments is critical for managing tradable and food price inflation.\n- Monitoring indexation mechanisms is important for understanding and addressing non-tradable goods inflation.\n- Monetary policy and macroeconomic frameworks should consider the potential for large supply shocks when assessing inflation outlooks.\n\nSource: Explaining Inflation in Colombia: A Disaggregated Phillips Curve Approach, Sergi Lanau, Adrian Robles, Frederik G Toscani, May 10, 2018.\n\n---\n\n Content in this bundle\n\n- Explaining Inflation in Colombia: A Disaggregated Phillips Curve Approach, WP/18/106, May 2018\n  - Explaining Inflation in Colombia: A Disaggregated Phillips Curve Approach, WP/18/106, May 2018 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Explaining Inflation in Colombia: A Disaggregated Phillips Curve Approach, WP/18/106, May 2018 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2018/05/10/explaining-inflation-in-colombia-a-disaggregated-phillips-curve-approach-45850"
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    "Authors: Sergi Lanau, Adrian Robles, Frederik G Toscani",
    "Published: May 10, 2018",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484354827.001",
    "The study uses a bottom-up Phillips curve approach to capture drivers of individual inflation components.",
    "The Phillips curve is relatively flat in Colombia but steeper than recent estimates for the U.S.",
    "Supply side shocks play an important role for tradable and food prices.",
    "Indexation dynamics are important for non-tradable goods.",
    "The bottom-up approach improves on an aggregate Phillips curve in terms of forecasting ability.",
    "In the baseline forecast scenario, both headline and core inflation converge towards the Central Bank’s inflation target of 3 percent by end-2018.",
    "These favorable inflation dynamics are vulnerable to large supply shocks.",
    "Approach: bottom-up (disaggregated) Phillips curve estimation to analyze individual inflation components.",
    "Focus areas: tradable inflation, food inflation, non-tradable goods inflation, indexation dynamics, supply side shocks, output gap effects, inflation expectations.",
    "Baseline forecast outcome: headline and core inflation converge to 3 percent by end-2018.",
    "Vulnerability highlighted: large supply shocks can derail convergence implied by the baseline forecast.",
    "Disaggregated modeling provides a more detailed understanding of inflation drivers than aggregate Phillips curve models and yields improved forecasting ability.",
    "Attention to supply side developments is critical for managing tradable and food price inflation.",
    "Monitoring indexation mechanisms is important for understanding and addressing non-tradable goods inflation.",
    "Monetary policy and macroeconomic frameworks should consider the potential for large supply shocks when assessing inflation outlooks.",
    "**Explaining Inflation in Colombia: A Disaggregated Phillips Curve Approach, WP/18/106, May 2018**"
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