arXiv subjects

Carlos Esteban Posada

Publications and source records attributed to Carlos Esteban Posada.

3 recordsLinked to original sources

arXiv2026

The Real Interest Rate as a Control Variable in the Open Economy

This paper addresses the structure and dynamics of an open market economy and its relations with the real interest rate. In this respect, the paper is situated within a broad conventional literature. However, it departs from the standard approach to the interest rate by treating it as a control variable. Even so, the analysis concludes that the two main determinants of the interest rate are the future utility discount rate and expectations regarding future multifactor productivity (labor efficiency). Furthermore, increases in such expectations lead to increases in both the interest rate and wages. These results are consistent with to those obtained with the Cass, Koopmans, Ramsey model.

econ.GN↗

arXiv2026

An Inflation Model for the Colombian Case. 2001 2025

Since the beginning of this century the Colombian monetary authority has conducted monetary policy under a strategy based on setting targets for interest rate and inflation, while allowing the exchange rate of the U.S. dollar in domestic currency to float freely. This paper takes that strategy into account in order to explain inflation. Our econometric results were obtained by applying the Generalized Method of Moments to test the hypotheses derived from the structural form of our model. The main findings indicate: a. the validity of a Phillips curve.That is, a positive relationship between the inflation rate and the output gap, conditional on inflation expectations; b. that the monetary authority has reacted to shocks in inflation and in the output gap by adjusting its policy in the appropriate direction but, up to the end of 2025, without being able to claim that its responses have always been timely and consistently forceful. In other words, it can be said that the monetary authority has not been aggressive in ensuring that observed inflation returns rapidly to levels consistent with the inflation target range.

econ.GN↗

arXiv2023

Inflation targeting strategy and its credibility

The money supply is endogenous if the monetary policy strategy is the so called Inflation and Interest Rate Targeting, IRT. With that and perfect credibility, the theory of the price level and inflation only needs the Fisher equation, but it interprets causality in a new sense: if the monetary authority raises the policy rate, it will raise the inflation target, and vice versa, given the natural interest rate. If credibility is not perfect or if expectations are not completely rational, the theory needs something more. Here I present a model corresponding to this theory that includes both the steady state case and the recovery dynamics after a supply shock, with and without policy reactions to such a shock. But, under the finite horizon assumption for IRT, at some future point in time the money supply must become exogenous. This creates the incentive for agents to examine, as of today, statistics on monetary aggregates and form their forecasts of money supply growth and inflation rates. Additionally, inflation models of the small open economy allow us to deduce that the IRT in this case is much more powerful than otherwise, and for the same degree of credibility. But things are not necessarily easier for the monetary authority: it must monitor not only internal indicators, but also external inflation and its determinants, and it must, in certain circumstances, make more intense adjustments to the interest rate.

econ.GN↗