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Macroeconomic Stabilisation and Emergency Liquidity Assistance

We introduce imperfect monetary policy transparency and strategic wage setting into a macro model where the central bank provides lender of last resort (LOLR) services to banks on top of its standard stabilisation policy. We study how, in the presence of adverse exogenous financial developments...

Macro-prudential assessment of Colombian financial institutions’ systemic importance

This document presents an enhanced and condensed version of preceding proposals for identifying systemically important financial institutions in Colombia. Three systemic importance metrics are implemented: (i) money market net exposures network hub centrality; (ii) large-value payment system...

Liquidity and Counterparty Risks Tradeoff in Money Market Networks

We examine how liquidity is exchanged in different types of Colombian money market networks (i.e. secured, unsecured, and central bank’s repo networks). Our examination first measures and analyzes the centralization of money market networks. Afterwards, based on a simple network optimization...

International Reserve Policy and Effectiveness of Sterilized FX Intervention in Colombia

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

 

Interest Rate Setting and the Colombian Monetary Transmission Mechanism

 

Institutional Efficiency in Independent Central Banking: A Communicative Matter?

Political economists have traditionally been indifferent to the communicative construction of money and central banking in the public sphere. It does not matter to them whether monetary affairs are rendered as a rational game over the preservation of the value of the currency or, for example, as...

Inflation Targeting, Sudden Stops and the Cost of Fear of Floating

Sudden stops seem to create the perfect environment for disinflation, especially when central banks defend the exchange rate by increasing interest rates. We propose a variation of the output gap model that incorporates the sudden stop shock. The use of the model in policy analysis shows that...

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...

Improving the Measurement of Core Inflation in Colombia Using Asymmetric Trimmed Means

The study evaluates the virtues of asymmetric trimmed means as efficient estimators of inflation for Colombia, an economy with high and variable inflation rates. Results suggest that the proposed indicators are more efficient than alternative indexes and are particularly suited for environments...

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...

Identifiability of a coincident index model for the Colombian economy

In this theoretical report, the identifiability property of a coincident index model is studied.  As a result, characterization of the identifiability conditions solves a model specification problem, which was detected in the design of an earlier index for the Colombian economy.   Key words and...

Forward Guidance with An Escape Clause: When half a promise is better than a full one

Using a three-equation New Keynesian model we find that incorporating an escape clause (EC) into Forward Guidance (FG) is welfare improving as it allows the monetary authority to avoid cases in which the cost of reduced flexibility is too high. The EC provides the central bank with another...

Foreign Exchange Intervention Revisited: A New Way of Estimating Censored Models

Most of the literature on the effectiveness of foreign exchange intervention has yet to reach a general consensus. In part, this is due to the different estimation methods in which exogenous variation is identified. In this sense, the use of heavily-dependent parametric models can sometimes...

Financial Frictions and Optimal Monetary Policy in a Small Open Economy

In this paper we set up a small open economy model with financial frictions, following Curdia and Woodford (2010)’s model. Unlike other results in the literature such as Curdia and Woodford (2010), McCulley and Ramin (2008) and Taylor (2008), we find that optimal monetary policy should not...

Evaluating the Impact of Macroprudential Policies in Colombia's Credit Growth

Macroprudential tools have been used around the world as a mechanism to control potential risks and imbalances in the financial sector. Colombia is a good example of a country that has employed different regulatory measures to manage systemic risks in the economy. The purpose of this paper is to...

Estimating the COP Exchange Rate Volatility Smile and the Market Effect of Central Bank Interventions: A CHARN Approach

 

Effects of Reserve Requirements in an Inflation Targeting Regime: The Case of Colombia

The Colombian economy and financial system have coped reasonably well with the effects of the global financial crisis. Hence, “unconventional” policy measures have not been at the center of the policy decisions and discussions. Nominal short term interest rates have remained the main monetary...

Effectiveness of FX Intervention and the Flimsiness of Exchange rate Expectations

 

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

 

 

Digital Payments Adoption and the Demand for Cash: New International Evidence

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

 

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...

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