Modelling the monetary policy reaction function of the Colombian Central Bank
This paper proposes a simple Ordered Probit model to analyse the monetary policy reaction function of the Colombian Central Bank. There is evidence that the reaction function is asymmetric, in the sense that the Bank increases the Bank rate when the gap between observed inflation and the inflation t...
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| Formato: | Documento de trabajo (Working Paper) |
| Lenguaje: | Español (Spanish) |
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Universidad del Rosario
2008
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| Acceso en línea: | http://repository.urosario.edu.co/handle/10336/10795 |
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ir-10336-107952019-09-19T12:37:01Z Modelling the monetary policy reaction function of the Colombian Central Bank Otero, Jesus Ramírez Gómez, Manuel Economía financiera Política monetaria Tasas de interés Política económica Moneda y banca Monetary policy reaction function Ordered Probit model Central Bank independence Colombia This paper proposes a simple Ordered Probit model to analyse the monetary policy reaction function of the Colombian Central Bank. There is evidence that the reaction function is asymmetric, in the sense that the Bank increases the Bank rate when the gap between observed inflation and the inflation target (lagged once) is positive, but it does not reduce the Bank rate when the gap is negative. This behaviour suggests that the Bank is more interested in fulfilling the announced inflation target rather than in reducing inflation excessively. The forecasting performance of the model, both within and beyond the estimation period, appears to be particularly good. 2008-04 2015-09-16T13:37:12Z info:eu-repo/semantics/workingPaper info:eu-repo/semantics/acceptedVersion Otero, J., & Ramírez, M. (2008). Modeling the monetary policy reaction function of the colombian central bank. Bogotá: Universidad del Rosario. http://repository.urosario.edu.co/handle/10336/10795 spa info:eu-repo/semantics/openAccess application/pdf Universidad del Rosario Facultad de Economía instname:Universidad del Rosario reponame:Repositorio Institucional EdocUR instname:Universidad del Rosario Carstensen, K. (2006) Estimating the ECB policy reaction function, German Economic Review, 7, 1–34. Choi, W.G. (1999) Estimating the discount rate policy reaction function of the monetary authority, Journal of Applied Econometrics, 14, 379–401. Davutyan, N. and Parke, M. R. (1995) The operations of the Bank of England, 1890–1908: a dynamic probit approach, Journal of Money, Credit and Banking, 27, 1099–112. Dolado, J. J., Maria-Dolores, R. and Naveira, M. (2005) Are monetary-policy reaction functions asymmetric? The role of nonlinearity in the Phillips curve, European Economic Review, 49, 485–503. Eichengreen, B., Watson, M. W. and Grossman, R. S. (1985) Bank rate policy under the interwar gold standard: a dynamic probit model, Economic Journal, 95, 725–45. Svensson, L.E.O. (1999) Inflation targeting as a monetary policy rule, Journal of Monetary Economics, 43, 607–654. Taylor, J. B. (1993) Discretion versus policy rules in practice, Carnegie-Rochester Conference Series on Public Policy, 39, 195–214. Williamson, J. (1996) The Crawling Band as an Exchange Rate Regime: Lessons from Chile, Colombia, and Israel, Institute for International Economics, Washington, DC. Wooldridge, J. M. (2002) Econometric Analysis of Cross Section and Panel Data, MIT Press, Cambridge, MA. |
| institution |
EdocUR - Universidad del Rosario |
| collection |
DSpace |
| language |
Español (Spanish) |
| topic |
Economía financiera Política monetaria Tasas de interés Política económica Moneda y banca Monetary policy reaction function Ordered Probit model Central Bank independence Colombia |
| spellingShingle |
Economía financiera Política monetaria Tasas de interés Política económica Moneda y banca Monetary policy reaction function Ordered Probit model Central Bank independence Colombia Otero, Jesus Ramírez Gómez, Manuel Modelling the monetary policy reaction function of the Colombian Central Bank |
| description |
This paper proposes a simple Ordered Probit model to analyse the monetary policy reaction function of the Colombian Central Bank. There is evidence that the reaction function is asymmetric, in the sense that the Bank increases the Bank rate when the gap between observed inflation and the inflation target (lagged once) is positive, but it does not reduce the Bank rate when the gap is negative. This behaviour suggests that the Bank is more interested in fulfilling the announced inflation target rather than in reducing inflation excessively. The forecasting performance of the model, both within and beyond the estimation period, appears to be particularly good. |
| format |
Documento de trabajo (Working Paper) |
| author |
Otero, Jesus Ramírez Gómez, Manuel |
| author_facet |
Otero, Jesus Ramírez Gómez, Manuel |
| author_sort |
Otero, Jesus |
| title |
Modelling the monetary policy reaction function of the Colombian Central Bank |
| title_short |
Modelling the monetary policy reaction function of the Colombian Central Bank |
| title_full |
Modelling the monetary policy reaction function of the Colombian Central Bank |
| title_fullStr |
Modelling the monetary policy reaction function of the Colombian Central Bank |
| title_full_unstemmed |
Modelling the monetary policy reaction function of the Colombian Central Bank |
| title_sort |
modelling the monetary policy reaction function of the colombian central bank |
| publisher |
Universidad del Rosario |
| publishDate |
2008 |
| url |
http://repository.urosario.edu.co/handle/10336/10795 |
| _version_ |
1645141226904616960 |
| score |
12,131701 |