Bogotá, Colombia

General equilibrium theory was criticized for its apparent irrefutability, as seemingly implied by the Sonnenschein-Mantel-Debreu theorem.  This view was challenged by Brown and Matzkin (1996), who showed the existence of testable restrictions on the equilibrium manifold. Brown and Matzkin…

In this paper I consider the following problem: there is a collection of exogenously given socially feasible sets, and for each one of them, each one of a group of individuals chooses from an individually feasible set. The fact that the product of the individually feasible sets is larger than…

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…

This paper studies the dynamic response of a few key macroeconomic variables to each one of three exogenous shocks: monetary, government spending and technological shocks. By using a cash in advance model with two market frictions, one in the intermediation of loanable funds, and one in the…

This paper exploits the long history of the minimum wage in a relatively stable developing economy like Colombia in order to see whether it may alleviate the living conditions of low income families and reduce income inequality. The paper does not only explore how the minimum wage may serve this…

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…

In this paper we check the relationship between the yields of the Colombian bonds traded in the (secondary) internal market and the yields of the sovereign global securities for the sample period 1999-2001. The hypothesis we maintain is that, under the assumption of capital mobility, it should…

This paper estimates an asymmetric error correction model to analyse the dynamic behaviour of the Colombian unemployment rate. We find evidence that wages above their long-run equilibrium level do increase unemployment, but wages below this level do not reduce it.

The empirical literature about economic growth has usually ignored spatial interdependence among countries. This paper uses spatial econometrics to estimate a growth model that includes cross-country interdependence, in which a country’s economic growth depends on the growth rate of its…

This paper quantifies the welfare effects of decentralisation in Colombia, using a multiregional CGE model. We investigate to what extent will the Colombian population be better off when goods such as health and education, are delivered locally as against centrally. A provision scheme based on…

In this paper, we propose a methodology for calculating a leading index of the economic activity based on a modification of Stock and Watson’s (1989, 1991, 1992) approach. We use Kalman filter techniques for estimating the state space representation of the leading index model. The methodology is…

This paper tests for purchasing power parity (PPP) between Colombia and its main trading partners using the Johansen framework of multivariate cointegration. The tests shows that PPP does not hold in the strong sense, but a clear purchasing power relationship is, nevertheless, show to exist. The…

This study develops three exchange rate models as well as a simple statistical model defined as a random walk with a variable drift. The exchange rate models all use the purchasing power parity hypothesis to account for the long-term relationships between prices and the exchange rate, together…

This study uses two different econometric frameworks to study exchange rate pass-through to import, producer and consumer prices in Colombia. Both frameworks are based on vector autoregressive (VAR) models, the first using an unrestricted VAR model, and the second using the Johansen framework of…

The effects of capital destruction are endogenized in a neoclassical growth model where the economy can optimally allocate part of its labor force to defend capital from being destroyed. The purpose is to explain the optimal allocation of the labor force between productive and deterrence…

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…

The World Bank has proposed an alternative hedging instrument to be offered by the FRECH, instead of the collar-swap currently available. The suggested derivative corresponds to a European Cap option for the real interest rate, which could give greater flexibility to the hedging mechanism,…

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…

In this paper the evolution in the average height of Colombians from 1910 to 1984 is analyzed. The anthropometric evidence reveals a sustained increase in the standard of biological welfare during this period.  A database with more than 8.000.000 observations from the national citizenship…

In this paper we discuss cost and profit efficiency for a sample of financial institutions on the Colombian financial market in the period 1989-2003, using stochastic frontier efficiency analysis. During the period, the cost efficient frontier deteriorates, but profit efficient frontier is…