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Vol. 38 No. 67 (2019)

Economic policy

Effects of Monetary Policy Announcements and Credibility on Inflation Expectations: Evidence for Colombia

https://doi.org/10.19053/01203053.v38.n67.2019.7912

Published 2019-02-07

  • Juan Camilo Galvis Ciro
    • ,
  • Juan Camilo Anzoategui-Zapata

Juan Camilo Galvis Ciro
Universidad Pontificia Bolivariana.

Juan Camilo Anzoategui-Zapata
Universidad Autónoma Latinoamericana

Abstract

This paper refers to the literature on the effects of central bank announcements on inflation expectations in developing countries. In particular, based on the Colombian experience, we study the impact of interest rate announcements and macroeconomic shocks on breakeven inflation rates, given the monetary policy credibility scenario. The empirical evidence is implemented by regression analysis using an EGARCH model between 2008-2016. We find that inflation expectations respond to policy statements in Colombia. Our results show that the central bank pronouncements were more effective in anchoring expectations in the period 2012-2016 and the greater monetary policy credibility allows inflation expectations to be more stable before external shocks.

Keywords

inflation expectations, monetary policy, central banks, econometrics

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Author Biography

Juan Camilo Galvis Ciro

Profesor Facultad de Economía.

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