Inflation, Uncertainty, and Growth in Colombia

by Henry Ma

Between 1955 and 1972, inflation in Colombia was relatively low. Since 1973, however, Colombia has experienced inflation averaging 18-22 percent (see Figure 1), making it the moderate-inflation country par excellence (Dornbusch and Fischer, 1993).2 Yet, Colombia has also been known for its prudent macroeconomic policies, to which have been attributed its record of sustained economic growth and manageable external debt, in contrast to the experience of other Latin American countries. Fiscal deficits were kept low (before widening somewhat in the 1990s), while monetary authorities have kept an eye toward an alarm signal of 30 percent inflation: When inflation exceeds that level (as in 1977 and 1990), monetary policy counteracts it (Echeverry, 1996).

31 pages, ebook

First published November 1, 1998