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Inflation and money in Colombia: another P-Star model

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Abstract

This document presents the estimation of a recent version of the P-Star model by Gerlach and Svensson (2003) and its predictions for Colombia (January 1980 to April 2005). The model is designed to explain the inflation gap (observed rate minus the target) based on the monetary gap and the output gap. According to the results, the output gap lacks significant effects while the monetary gap has significant positive effects on inflation.

Suggested Citation

  • Andres Gonzalez & Luis Melo & Carlos Posada, 2009. "Inflation and money in Colombia: another P-Star model," Applied Economics, Taylor & Francis Journals, vol. 41(10), pages 1321-1329.
    • Handle: RePEc:taf:applec:v:41:y:2009:i:10:p:1321-1329
    DOI: 10.1080/00036840701704493
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    1. Tobias Broer & Rodrigo Caputo, 2004. "Money As An Inflation Indicator In Chile: Does P* Still Work?," Working Papers Central Bank of Chile 293, Central Bank of Chile.
    2. Sanchez-Fung, Jose R., 2002. "Inflation targeting and monetary analysis in Chile and Mexico," Economics Discussion Papers 2002-7, School of Economics, Kingston University London.
    3. Takatoshi Ito & Yuri N. Sasaki & Kiyotaka Sato, 2005. "Pass-Through of Exchange Rate Changes and Macroeconomic Shocks to Domestic Inflation in East Asian Countries," Discussion papers 05020, Research Institute of Economy, Trade and Industry (RIETI).
    4. W A Razzak, 2002. "Monetary policy and forecasting inflation with and without the output gap," Reserve Bank of New Zealand Discussion Paper Series DP2002/03, Reserve Bank of New Zealand.
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