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

29 Pages Posted: 3 Dec 2016

Date Written: November 1, 2016

Abstract

Empirical evidence following conventional tests suggests that inflation expectations in Colombia might not be rational, although the period of disinflation included in the sample makes it difficult to verify this conclusion. Inflation expectations display close ties with observed past and present headline inflation and are affected by exogenous shocks in a possibly non-linear way. A model-based core inflation measure is computed that addresses the shortcomings of traditional exclusion measures when temporary supply shocks have widespread effects and are persistent.

Full Publication: Inflation Mechanisms, Expectations and Monetary Policy

Keywords: Inflation expectations, core inflation, supply shocks, monetary policy

JEL Classification: E31, E37, E52

Suggested Citation

Vargas, Hernando, Inflation Expectations and a Model-Based Core Inflation Measure in Colombia (November 1, 2016). BIS Paper No. 89i, Available at SSRN: https://ssrn.com/abstract=2870961

Hernando Vargas (Contact Author)

Banco de la República ( email )

Carrera 7 #14-78
Bogota
Colombia

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