Working Papers on Economics

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…

his paper surveys some facts relevant for the understanding of the Colombian experience with public finance and debt since 1923. The stylized facts are classified in three groups as follows: first, facts associated with the dependence of the economy on the external sector; second, facts which…

This paper extends the asymptotic results of the dynamic ordinary least squares (DOLS) cointegration vector estimator of Mark and Sul (2003) to a three-dimensional panel. We use a balanced panel of N and M lengths observed over T time periods. The cointegration vector is homogenous across…

This paper examines trends in banknote printing during the period 2000-2005 for a crosssection of 56 central banks. It was identified that central banks have implemented new strategies to increase efficiency in the production of banknotes, primarily due to the increase in the demand for currency…

This study presents an alternative way of estimating credit transition matrices using a hazard function model. The model is useful both for testing the validity of the Markovian assumption, frequently made in credit rating applications, and also for estimating transition matrices conditioning on…

There is now an impetus to apply dynamic stochastic general equilibrium models to forecasting. But these models typically rely on purpose-built data, for example on tradable and nontradable sector outputs. How then do we know that the model will forecast well, in advance? We develop an early…

Colombia experienced a deep recession in 1999-2003. Growth slowed by 4.2%, and investment by 34.6%. Was the severity of the recession due to a financial accelerator mechanism á la Bernanke, Gertler, and Gilchrist (1999)? To answer this question, this paper estimates a dynamic stochastic general…

In this paper we explore the price setting behavior of Colombian producers and importers using a unique database containing the monthly price reports underlying the Colombian PPI from Jun-1999 to Oct-2006. We focus on five particular questions:

This paper examines whether central banks in Latin America have implemented conventional inflation targeting (IT) prescriptions, with a focus on foreign exchange intervention and official reserves accumulation policies. To this end, the paper reviews the experiences of Brazil, Chile, Colombia,…

This paper approaches active management of baskets of currencies from the perspective of Complexity theory, where the market is analysed as a Complex Adaptive system. A basket of currencies is constructed using objective probabilities (propensities) and an artificial intelligence optimization…

Financial system’s health is a signal of economic growth therefore it is a key indicator to investors. As a consequence, one of the main purposes of policymakers is to keep its stability as well as protect it from foreign activity. Both financial and economic activity in general are susceptible…

The purpose of this study is twofold: First, it provides an empirical characterization of fiscal policy in Colombia over the last decades, by assessing the three most relevant macroeconomic factors: the behavior of fiscal policy over the business cycle; whether it has been coherent with the long…

This document provides evidence to show that Colombia is a net exporter of 5% of its population with a university or post-graduate degree, while Argentina, Brazil and Chile are net importers of people with a similar level of education.

This paper explores the relationship between central bank independence and inflation in Latin America, using as a case study the experience of Colombia (1923-2008). Since its creation, in 1923, Colombia’s central bank has undergone several reforms that have changed its objectives and degree of…

Operational Risk (OR) results from endogenous and exogenous risk factors, as diverse and complex to assess as human resources and technology, which may not be properly measured using traditional quantitative approaches.  Engineering has faced the same challenges when designing practical…

The economic research of 30 central banks in OECD and Latin America countries from 2000 to 2007 is evaluated in this study. An international comparison based on four indexes that measure central bank research output, demand, productivity and relevance is included. From this view, the European…

The price setting behavior of Colombian retailers of goods and services was studied based on a unique dataset containing 12,052,970 individual price reports covering all items in the Colombian CPI from March 1999 to May 2008. The main results are summarized as follows: 1. Colombian consumer…

The unfolding of the 2007 world financial and economic crisis has highlighted the vulnerability of real economic activity to strong fluctuations in asset prices. Which is the optimal monetary policy in an economy like the Colombian that is exposed to swings in asset prices? What is the…

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…