This paper analyzes the performance of Colombia’s monetary and exchange rate policies over the past decade. It concludes that compared with other medium and large-sized Latin American economies using inflation targeting-cum-managed floating, Colombia has been the most effective in meeting its inflation target. The Colombian central bank has also shown an earlier and greater determination than its partners in pursuing a counter-cyclical monetary policy. But it clearly failed in the objective of avoiding exchange rate overvaluation, particularly in the aftermath of the North-Atlantic financial crisis. This has generated effects on the structure of domestic production and exports that have long-term implications.
