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A Proposal on Macro-prudential Regulation

This paper assesses the choice of different regulatory policy instruments for crisis management and prevention.

A rank approach for studying cross-currency bases and the covered interest rate parity

We use the recently developed panel rank-cointegration test proposed by Pedroni et al. [2015] to check for the stability conditions of the cross-country money market interest rate bases. Using weekly information on short-term interest rates and spot and forward exchange rates for a set of 20...

An Empirical Analysis of the Relationship between US and Colombian Long-Term Sovereign Bond Yields

We study the relationship between US and Colombian sovereign debt interest rates. We also evaluate the response of the Colombian long-term bond yield and other asset prices to shocks to the US long-term Treasury rate. Two empirical exercises are performed. First, we use a moving window linear...

An Empirical Analysis of the Relationship between US and Colombian Long-Term Sovereign Bond Yields

We study the relationship between US and Colombian sovereign debt interest rates between 2004 and 2013. We also evaluate the response of the Colombian long-term bond yield and other asset prices to shocks to the US long-term Treasury rate. Two empirical exercises are performed. First, we use a...

Commodity Price Fluctuations, Core Inflation and Policy Interest Rates

The world economy has recently been hit by commodity price fluctuations, with first round effects on noncore inflation and second round effects on core inflation. The policy response to commodity price fluctuations depends on the first and second round effects as well as on the strength of the...

Commodity Price Shocks and Inflation within An Optimal Monetary Policy Framework: The case of Colombia

A small open macroeconomic model, in which an optimal interest rate rule emerges to drive the inflation behavior, is used to model inflation within an inflation targeting framework. This set up is used to estimate the relationship between commodity prices shocks and the inflation process in a...

Does the Spot Curve Contain Information on Future Monetary Policy in Colombia?

In order to asses the credibility of their targets and policies, inflation targeting central banks always keep an eye on market expectations of the future inflation rates and short maturity interest rates. In economies with developed financial markets the prices of financial assets are a prime...

Estimations of the natural rate of interest in Colombia

Three methodologies to estimate the natural interest rate, NIR, are implemented for the Colombian economy. Two methods are statistical filters and the third involves some economic theory. The first method is based on unobserved components decomposition of the real interest rate and explores the...

Forecasting Latin-American Yield Curves: An Artificial Neural Network Approach

This document explores the predictive power of the yield curves in Latin America (Colombia, Mexico, Peru and Chile) taking into account the factors set by the specifications of Nelson & Siegel and Svensson. Several forecasting methodologies are contrasted: an autoregressive model, a vector...

Identifying the Effects of Simultaneous Monetary Policy Shocks. Fear of Floating under Inflation targeting

Many central banks, particularly in the developing world, aim for exchange rate stability as a macroeconomic goal. However, most are reluctant to relinquish monetary policy autonomy, so they end up operating through both interest rate and foreign exchange interventions. But the use of multiple...

Inflation Targeting in Colombia, 2002-2012

After decades using monetary aggregates as the main instrument of monetary policy and having different varieties of crawling peg exchange rate regimes, Colombia adopted a full-fledged inflation-targeting (IT) regime in 1999, with inflation as the nominal anchor, a floating exchange rate, and the...

Interest rate pass-through in Colombia: a micro-banking perspective

Banks and other credit institutions are key players in the transmission of monetary policy, especially in emerging market economies, where the responses of deposit and loan interest rates to shifts in policy rates are among the most important channels. This pass-through depends on the conditions...

Interest Rate Pass-Through in Colombia: A Micro-Banking Perspective

The importance of the banking sector as a key player in interest rate passthrough has been recognized recently in literature concerning monetary policy transmission mechanisms. The interest rate channel, which operates when banks pass on changes in the monetary policy rate to interest rates for...

Interest Rate Setting and the Colombian Monetary Transmission Mechanism

 

Output Gap and Neutral Interest Measures for Colombia

In this paper two new measures of the Colombian output gap and the real neutral interest rate are proposed. Instead of relying only on statistical filters, the proposed measures use semi-structural New-Keynesian models, adapted for a small open economy. The output gap measures presented are in...

Simultaneous Monetary Policies in the Context of the Trilemma: Evidence from the Central Bank of Turkey

Many central banks that have opted for monetary autonomy have also been reluctant to relinquish control over the value of their currencies. As a result, they have operated through both interest rate and foreign exchange interventions.  However, in the context of the monetary trilemma, both...

Sovereign Risk and the Real Exchange Rate: A Non-Linear Approach

We estimate a model of real exchange rate determination which is based on interest rate, term structure and purchasing power parities. This model takes into account sovereign risk as a key determinant with possibly non-linear effects. Estimations are performed for five Latin-American economies:...

The Banking Spread and the Resource Cost of Capital

The paper provides a model of the banking firm in the macroeconomy intended to explain what determines the interest rate spread. A key factor explaining the spread in our model is the resource cost of capital. A statistical result confirms the prediction of the model, that is, the bank's spread...

The Colombian Economy in the Nineties: Capital Flows and Foreign Exchange Regimes

The International Transmission of Risk: Causal Relations Among Developed and Emerging Countries’ Term Premia

We study the effect of shocks to the United States government bonds term premium on Latin American government bonds term premia. For doing so, we compute dynamic multipliers. Our main findings indicate that Latin American countries’ term premia respond permanently to changes in United States...

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