Inflation and Money in Colombia: Another P-Star Model

This document presents the estimation of a recent version of the P-Star model by Gerlach and Svensson (2003) and its predictions for Colombia (January 1980 to April 2005). The model is designed to explain the inflation gap (observed rate minus the target) based on the monetary gap and the output gap. According to the results, the output gap lacks significant effects while the monetary gap has significant positive effects on inflation.

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