Inflation, Uncertainty, and Growth in Colombia

"Second-Generation" Civil Service Reform in Africa

Author: Mr. Henry Ma

It has been argued that higher levels of inflation lead to greater uncertainty about future inflation and to greater dispersion of relative prices. In either case, inflation could reduce the efficiency of market prices in coordinating economic activities. This paper shows that the rise of inflation in Colombia, from low levels in the 1950s to average rates of 18-22 percent since the 1970s, has been accompanied by increased uncertainty and relative price dispersion; and that inflation has had a negative and persistent effect on real GDP growth.

Volume/Issue: Volume 1998 Issue 161

Publication date: November 1998

ISBN: 9781451981582

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Topics covered in this book

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Business and Economics , Inflation , WP , inflation uncertainty , price dispersion , inflation , relative price dispersion , VAR , inflation risk premium , inflation increase , inflation lead , inflation shock , inflation level , consumer price inflation , inflation hedge , forecasting inflation

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Summary

It has been argued that higher levels of inflation lead to greater uncertainty about future inflation and to greater dispersion of relative prices. In either case, inflation could reduce the efficiency of market prices in coordinating economic activities. This paper shows that the rise of inflation in Colombia, from low levels in the 1950s to average rates of 18–22 percent since the 1970s, has been accompanied by increased uncertainty and relative price dispersion; and that inflation has had a negative and persistent effect on real GDP growth.