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The Effects of Foreign Exchange Intervention: Evidence from a Rule-Based Policy in Colombia

Abstract: We investigate the effectiveness of foreign exchange interventions using the Colombian experience as a case study. Recent theoretical work emphasizes the importance of financial sector balance sheets and capital flows in determining the effects of currency...

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

Systemic Risk, Aggregate Demand, and Commodity Prices

The paper presents a global model for analysis and projections. The model features a handful of elements that make it suitable for analyzing three broad sets of topics; first, systemic risk and its transmission to country risk premiums; second, the transmission from country risk premiums to...

Systemic Importance Index for Financial Institutions: A Principal Component Analysis Approach

As a result of the most recent global financial crisis literature has embraced size, connectedness and substitutability as key indicators for financial institutions’ systemic importance. Despite the intuitiveness of these concepts, identifying systemic important institutions remain a non-trivial...

SYSMO I: A Systemic Stress Model for the Colombian Financial System

 

The opinions contained in this document are the sole responsibility of the author and do not commit Banco de la República or its Board of Directors.

 

Supplementary Material for “The Effects of Foreign Exchange Intervention: Evidence from a Rule-Based Policy in Colombia”

This Appendix provides a more detailed discussion of the technical results, including proofs of theorems reported in the main paper. For ease of reference notation and definitions are repeated from the main paper.

 

State-dependent Forward Guidance and the Problem of Inconsistent Announcements

Florez-Jimenez and Parra-Polania (2016) show that unconditional forward guidance (FG) performs poorly except in the most extreme zero lower-bound (ZLB) events and that for any ZLB situation it is better to resort to state-dependent (threshold-based) FG. The model of that paper is solved under...

Spillovers of the ECB's non-standard monetary policy into CESEE economies

In this paper we provide evidence that ECB's asset purchase programmes spill over into CESEE countries contributing to easing their financial conditions, both in the short- and in the long-term through different transmission channels. In the short run, a selected number of financial variables in...

Sovereign Risk and Real Business Cycles in a Small Open EconomyMacroeconomic

This paper investigates the effect of sovereign risk on the stochastic rational expectations equilibrium of a real business cycle small open economy. The market is imperfect because the sovereign cannot commit to repay its outstanding debt and chooses to default when it is optimal to do so. The...

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...

Risk, Aggregate Demand, and Commodity Prices: An Application to Colombia

We embed a small open economy model for Colombia into the global risk model of Gómez-Pineda, Guillaume, and Tanyeri (2014). The small open economy model is estimated by Bayesian methods and used for analysis and projections. The model enable us to give a consistent treatment of shocks to global...

Public Savings and the Effectiveness of Sterilized Foreign Exchange Intervention

Abstract

Procedural transparency in Latin American central banks under inflation targeting schemes. A text analysis of the minutes of the Boards of Directors

The disclosure of the minutes of the Boards of Directors of central banks (procedural transparency within the inflation targeting (IT) literature) implies the challenge of sending a clear message. Regardless of whether the document released is a brief, moderate, or highly detailed (verbatim)...

Price-Level Targeting: an omelette that requires breaking some Inflation-Targeting eggs?

Output Gap Estimation, Estimation Uncertainty and Its Effect on Policy Rules

Output Gap Estimation, Estimation Uncertainty and its Effect on Policy Rules


Output Gap Estimation, Estimation Uncertainty and its Effect on Policy Rules

Optimum and Adequate Level of International Reserves

When managing international reserves, central banks generally face the problem of determining what their optimum or adequate level is.  A critical review of some methodologies for calculating the optimum amount of reserves is presented in this document.

On the design of public institutions: Evidence from financial

This paper studies the allocation of the functions and responsibilities of prudential supervision on public authorities, including the central bank. In particular, it is argued that there are interdependencies in the design of institutions; political decisions on the supervisory structure are...

Non-monotonic Tradeoffs of Tiering in a Large Value Payment System

Even though international authorities encourage open and wide access to large value payment systems, the optimal level of access, or tiering, is still an open question. In the case of real-time gross settlement systems (RTGS), the level of access, or tiering, may be limited by the tradeoff...

Monetary Policy Rules in a Search Model of the Labor Market

This paper studies the performance, in terms of volatility and welfare, of different monetary policy rules in an economy with two market frictions. We consider a financial friction that highlights the credit channel as the monetary transmission mechanism and a labor friction, that considerably...

Monetary Policy and the Exchange Rate in Colombia

The role of the exchange rate and the exchange rate regime in the monetary policy decision-making process in Colombia is described. The rationale for the intervention of the Central Bank in the FX market is explained and the experience in this regard is reviewed. Special attention is given to...

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