Exchange rate pass-through in Colombia accelerates and grows before inflation targeting.
The study used a new method to estimate how changes in exchange rates affect prices in Colombia. They found that the impact of exchange rate changes on prices is bigger and faster than previously thought. The effect was stronger before the country fully adopted Inflation Targeting. After full Inflation Targeting, the impact of exchange rate changes on prices was smaller. The study also showed that the adoption of Inflation Targeting in Colombia led to lower volatility in output and prices.