An Adaptive Expectations Approach to the Mechanisms of Transmission Model of the Central Bank of Colombia Fernando Arenas – Pontificia Universidad Javeriana Franz Hamann – Banco de la República ABSTRACT Looking for the potential applications of system dynamics in macroeconomic modeling at the Central Bank of Colombia, the Mechanisms of Transmission Model (MTM) was recast in a system dynamics model. The forward-looking function of the model that, in the case of the MTM is a rational expectations based function, was approached by means of the TREND function. This document describes the system dynamics model and shows comparative impulse-response results between the models, when PULSE and STEP shocks are applied to inflation target, monetary policy, food supply, nominal depreciation rate, and risk premium.

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• 2005 July 17-2005 July 21

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• Document

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• Processing documentation available at: https://wiki.albany.edu/display/SCA/Processing+Ingested+Digital+Files

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System Dynamic Society Records

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• This collection is part of the University Archives