EL COMPORTAMIENTO DE LA INFLACIÓN EN COLOMBIA DURANTE EL PERÍODO 1955-2004 (Article published in Spanish)

Abstract

This paper discusses the results of some research conducted in order to determine the behavior of inflation in Colombia in the time period from 1955 to 2004. It reviews the factors that have affected its evolution and also discusses the theoretical basis that supports the analysis of these factors. This review is broken down into three different periods that extend from 1955 to 2004. The first period goes from 1955 to 1970 and addresses a period in which there was a fixed exchange rate, which was agreed upon at the Treaty of Bretton Woods. It concurs with a series of currency exchange crises, which have an impact on the behavior of inflation. The second period from 1970 to 1990 encompasses the time of a strong focus on the application of Keynesian mechanisms to increase public expenditures which, in turn, gave rise to continuous issuances of cash to make up for successive fiscal deficits. It was also the time in which the Crowling-Peg system was used. This inflation-based system adjusted the exchange rate on a daily basis to maintain an actual low exchange rate for the Colombian Central Bank (Banco de la República) to issue money in order to be able to purchase all of the foreign currency coming into the country. All of the above measures translated into an increased annual inflation rate of more than 20%. The third period from 1990 to 2004 encompasses a period of economic opening and the beginning of an autonomous operating Central Bank (Banco de la República), which has been responsible for inflationary control since then. This has required that the bank operate based on a target inflation rate. As a result, inflation rates have decreased from high levels in the early 1990s to current rates below 10%.