IMF Working Papers

Explaining Inflation in Colombia: A Disaggregated Phillips Curve Approach

By Sergi Lanau, Adrian Robles, Frederik G Toscani

May 10, 2018

Download PDF

Preview Citation

Format: Chicago

Sergi Lanau, Adrian Robles, and Frederik G Toscani. Explaining Inflation in Colombia: A Disaggregated Phillips Curve Approach, (USA: International Monetary Fund, 2018) accessed November 4, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We study inflation dynamics in Colombia using a bottom-up Phillips curve approach. This allows us to capture the different drivers of individual inflation components. We find that the Phillips curve is relatively flat in Colombia but steeper than recent estimates for the U.S. Supply side shocks play an important role for tradable and food prices, while indexation dynamics are important for non-tradable goods. We show that besides allowing for a more detailed understanding of inflation drivers, the bottom-up approach also improves on an aggregate Phillips curve in terms of forecasting ability. In the baseline forecast scenario, both headline and core inflation converge towards the Central Bank’s inflation target of 3 percent by end-2018 but these favorable inflation dynamics are vulnerable to large supply shocks.

Subject: Consumer price indexes, Economic forecasting, Exchange rates, Foreign exchange, Inflation, Output gap, Prices, Production

Keywords: Baseline inflation, Colombia, Consumer price indexes, Core inflation, CPI inflation regression, Education inflation, Exchange rates, Food inflation, Forecast, Fuel price inflation, Global, Headline inflation, Inflation, Inflation Components, Inflation expectation, Output gap, Output gap shock, Phillips curve, Phillips curve coefficient, Tradable inflation, World inflation, WP

Publication Details

  • Pages:

    29

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2018/106

  • Stock No:

    WPIEA2018106

  • ISBN:

    9781484354827

  • ISSN:

    1018-5941

You May Also Be Interested In...

The Federal Democratic Republic of Ethiopia: First Review Under the Extended Credit Facility Arrangement, Request for Modification of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for The Federal Democratic Republic of Ethiopia

November 4, 2024

Mexico: 2024 Article IV Consultation and Review Under the Flexible Credit Line Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Mexico

November 1, 2024

IMF

The Managing Director's Global Policy Agenda, Annual Meetings 2024: Secure A Soft Landing And Break From The Low Growth–High Debt Path

October 24, 2024

Beyond Energy: Inflationary Effects of Metals Price Shocks in Production Networks

October 22, 2024