Inflationary trends in Colombia
Journal of Policy Modeling
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Colombian inflation exceeded 32 percent in 1990. In respomse, the government announced plans to slash the inflation rate by 10 points in 1991. To examine potential impacts of the anti-inflation program, the effects of slower rates of nominal exchange rate devaluation and money supply growth are studied. Empirical analysis is carried out utilizing transfer function autoregressive-moving average (ARMA) analysis. Monthly data from 1967 forward are analyzed, corresponding to the crawling peg era of exchange rate determination in Colombia. Money and the exchange rate are found to Granger-cause the consumer price index (CPI). Model simulation indicates that adherence to the program can lead to noticeable disinflation over a 24-month period. © 1993.