In this paper we set up a small open economy model with financial frictions, following Curdia and Woodford (2010)’s model. Unlike other results in the literature such as Curdia and Woodford (2010), McCulley and Ramin (2008) and Taylor (2008), we find that optimal monetary policy should not...

After decades using monetary aggregates as the main instrument of monetary policy and having different varieties of crawling peg exchange rate regimes, Colombia adopted a full-fledged inflation-targeting (IT) regime in 1999, with inflation as the nominal anchor, a floating exchange rate, and the...

We analyse three models to determine the conditions under which reserve requirements are used as a part of an optimal monetary policy framework in an inflation targeting regime. In all cases the Central Bank (CB) minimizes an objective function that depends on deviations of inflation from its...

This manuscript can be divided into two main parts. The first one, using a simple example by Minford (2004) and Hatcher (2011), gives the reader a basic introduction to understand the comparison between two monetary-policy regimes: Inflation Targeting (IT) and Price-Level Targeting (PLT). The...

This paper propose indicator variables for the implementation of monetary policy in an inflation targeting regime. Using constant interest rate projections, the notion of a target-compatible interest rate is presented. This variable allows to extract some characteristics that the expected future...

The Colombian economy and financial system have coped reasonably well with the effects of the global financial crisis. Hence, unconventional" policy measures have not been at the center of the policy decisions and discussions. Nominal short term interest rates have remained the main monetary...

The Colombian economy experienced several shocks in the past ten years. The permanent fall of inflation, the adoption of inflation targeting (IT) and a financial crisis altered the transmission mechanism of monetary policy. Low inflation and IT reduced inflation persistence and contributed to...

This paper examines trends in banknote printing during the period 2000-2005 for a crosssectionof 56 central banks. Because of the high increase in the demand for currency inrecent years, central banks have implemented new strategies to increase efficiency in theproduction of banknotes. Some of...

En este documento se utiliza la metodología FAVAR (factor augmented VAR) para evaluar el impacto de variaciones no esperadas en cuatro variables internacionales: las tasas de interés de corto plazo, el riesgo, el precio real del petróleo, el café y el carbón, y la actividad económica...

Este artículo estudia el mecanismo de transmisión de la política monetaria a través delos salarios reales y la oferta de trabajo. El trade-off inflación producto depende de lacalificación de los trabajadores y de la elasticidad de la oferta de trabajo al salario real.Se plantea un modelo...