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A Consumption-Based Approach to Exchange Rate Predictability

This paper provides evidence of short-run predictability for the real exchange rate by performing out-of-sample tests of a forecasting equation which is derived from a consumption-based asset pricing model. In this model, the real exchange rate is predictable as a result of the implications of...

A Model of the Nominal and Real Exchange Rates in Colombia

A Model of the Nominal and Real Exchange in Colombia

A Model of the Nominal and Real Exchange in Colombia   Javier Gómez*

A Survey on the Effects of Sterilized Foreign Exchange Intervention

In this paper we survey prominent theories that have shaped the literature on sterilized foreign exchange interventions. We identify three main strands of literature: 1) that which advocates the use of sterilized interventions; 2) that which deems sterilized interventions futile; and 3) that...

An Auction-Based Test of Private Information in an Interdealer FX Market

 

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.

 

 

Analyzing the Exchange Rate Pass-through in Mexico: Evidence Post Inflation Targeting Implementation

This paper presents an analysis of the exchange rate pass-through mechanism for the Mexican economy after the formal adoption of inflation targeting policy. In particular, this research work analyzes how a change in the nominal exchange rate depreciation is transmitted to domestic prices along...

Announcements are not Enough: Foreign Exchange Intervention under Imperfect Credibility

Central banks in emerging countries frequently build-up (diminish) reserves while attempting to depreciate (appreciate) their domestic currencies. Even if these interventions are effective, they often entail various costs. Basu (2012), nonetheless, proposes a model in which the sole announcement...

Are Capital Controls and Central Bank Intervention Effective?

Capital controls and intervention in the foreign exchange market are two controversial policy options that many countries have adopted in the past in order to influence the exchange rate and moderate capital flows. Colombia has a long record in the use of these policies with mixed results and...

Banking Limits on Foreign Holdings: Disentangling the Portfolio Balance Channel

In this paper we analyze the effects of financial constraints on the exchange rate through the portfolio balance channel. Our contribution is twofold: First, we construct a tractable two-period general equilibrium model in which financial constraints inhibit capital flows. Hence, departures from...

Do foreign exchange interventions work as coordinating signals in Colombia?

This paper analyses the effectiveness of official interventions of the Colombian Central Bank in the foreign exchange market over the period of June 2008–December 2013. The estimation procedure suggested by Hansen (2000) is used to estimate a threshold model for the spot exchange rate that...

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.

 

 

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

 

Exchange Rate Pass-Through Effects: A Disaggregate Analysis of Colombian Imports of Manufactured Goods

Colombian monthly data covering the period from 1995:01 to 2002:11 and ECM, fixed and time-varying parameters and Kalman filter techniques are used in this paper to quantify the exchange rate pass-through effects on import prices within a sample of manufactured imports. Also, whether the foreign...

External Shocks and Asset Prices in Latin America before and after Lehman Brothers’ Bankruptcy

The international financial crisis of 2007-2009 strongly affected asset prices, risk and growth in the advanced economies, leading to large capital movements between these economies and the emerging countries. The capital movements were reflected in sharp fluctuations in the emerging countries’...

Foreign Exchange Intervention in Colombia

Banco de la República’s FX intervention policy is described, with a focus on its objectives and main features. Then, based on a survey of the effectiveness of sterilized intervention in Colombia, it is argued that this tool is not useful to cope with the challenges posed by medium term external...

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...

Great Expectations? Evidence from Colombia’s Exchange Rate Survey

In this document we use the Expectations Survey conducted monthly by the Central Bank of Colombia during the period of October 2003 – August 2012. We find that exchange rate revaluations were generally followed by expectations of further revaluation in the short run (1 month), but by...

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...

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...

Monetary Neutrality in the Colombian Real Exchange Rate

Monetary neutrality in the colombian Monetary neutrality in the Colombian real exchange rate


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This content has been translated into English for informational purposes. Upon any query regarding its interpretation or enforceability, the Spanish version shall be deemed official, and will prevail over the English version. The authors of specific texts such as working papers or articles select the language of publication; therefore, there might be cases in which the content may only be available in English.