An Estimated New Keynesian Phillips Curve for Colombia, 1996-2006

This paper seeks to verify empirically the existence of a New Keynesian Phillips curve for the Colombian economy. This allows determining if inflation dynamics are likely explained by microeconomic foundations. Additionally, this approach enables the analysis of price rigidities in the economy. The results suggest that: (1) unit labor costs explain inflation dynamics; (2) eighty percent of firms set their prices every five quarters; and, (3) productivity changes explain marginal costs.