Financial Accelerator Mechanism in a Small Open Economy


Series: 
Working Papers
Number: 
525
August
2008
Author(s) / Editor(s): 
Martha López
Juan David Prada
Norberto Rodríguez
Publishing House: 
Banco de la República
JEL Classification: 

Using Bayesian estimation techniques, we estimate a small open economy DSGE model with credit-market imperfections for the Colombian economy. Using the estimated model we investigate what are the sources of business cycle fluctuations. We show that balance-sheet effects play an important role in explaining recent Colombian business cycles. We then perform a counterfactual exercise that shows that fixed exchange rate regime could have exacerbated the financial distress in the economy between 1998-1999.
 
The views expressed in the paper are those of the authors and do not represent those of the Banco de la República or its Board of Directors.

Category / Classification: 
Documentos en elaboración

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