MONETARY AND EXCHANGE RATE POLICIES IN COLOMBIA PROGRESS AND哥伦比亚的货币政策和汇率政策.pptVIP

MONETARY AND EXCHANGE RATE POLICIES IN COLOMBIA (1991-2002) “The only way [the FED and the Bank of England] affect inflation is by changing the amount of high-powered money…… The difference between the two approaches is in the way they choose to describe their operations to the public, not in the actual operating procedures”. Milton Friedman (2002) “Interview” Quarterly Journal of Central Banking (August). Some History: Flotation of the peso/dollar was adopted in September 1999, as a result of the Asian, Russian, and Brazilian crises. Formal “inflation targeting” was announced in October 2000. The stance of monetary policy is transmitted through the repo-rate, within a framework of “lombard rates”. Consolidation of a trinity framework: Flexible exchange rate; Inflation targeting; and Monetary policy rule (Taylor, 2001). Preliminary Results: Inflation has stabilized around 7%, completing four consecutive years of one digit inflation in Colombia. Remarkable for a country with the most persistent moderate-inflation over the previous three decades, average inflation of 22% (Dornbusch and Fischer, 1991). Real exchange rate has depreciated by 15-20% during 1999-2003. Systemic Risks? Housing crises exploded in 1998. “Last resort” money avoided contagion of the financial system. Cost of the crises is 4-6% of GDP over the period 1998-2007. Institutional Framework: Constitutional mandate of the CB is hierarchical since 1991: Pursue low and stable inflation, but In line with government development plan, which targets higher growth and employment. The BdR has only instrumental independence. We will argue: In favor of adopting “operational inflation ranges”. In favor of foreign exchange “options” as a way to confront capital markets turbulence. Table 1: Inflation, Unemployment and Growth in Colombia Conclusion: The 1998-2002 episode of “opportunistic dis-inflation”: a chance for reducing financial and wage indexation. Orphanides and