Working Papers on Economics

The study of the asymmetric behavior of macroeconomic variables over the business cycles phases has had a long tradition in economics. In this work we find evidence in favor of the hypothesis of having a STAR-type nonlinear asymmetric behavior of the economic activity, over the last two decades…

I build a general equilibrium, financial accelerator model that incorporates an explicit technology for the intermediary sector. A credit multiplier emerges because of a borrowing constraint that is a function of asset prices, internal funds and lending rates. With this financial friction I show…

The construction of coincident indexes for the economic activity of a country is a common practice since the fifties. The methodologies vary from heuristic methods to probabilistic or statistical ones. In this paper, we present a new procedure for estimating a coincident index of the state of…

A Statement of the Colombian Constitutional Court has mandated wage indexation on the basis of past inflation. A simple model with a wage price system, a real block, and an inflation targeting interest rule is calibrated to resemble price setting in the Colombian economy and to analyze the…

There is large body of empirical literature devoted to study the relationship between inflation and long-run growth. Recently, levine and Renelt (1992) encouraged by new developments in growth theory investigated, within a unified framework, the effet of a number of variables on per capita…

SeveralObservers of Latin America have underscored the notion that an emerging "consensus" regarding the role of the State in the economy surfaced during the 1980's (v.g World Bank, 1993; Williamson, 1993). Starting from an emphasis on issues regarding stabilization, there are three main and…

The purpose of this paper is to analyze the links between central bank independence and foreing exchange policies, in the light of the recent experience of the major Latin American countries. To that end, the paper starts with a brief review of the literature on the subject. The second section…

The study presented here is a follow-up study to Rowland and Torres (2004), who used a panel data framework together with data from 16 emerging market issuers to identify the determinants of the spread and the creditworthiness. Since many new issuers of emerging market sovereign debt have…

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…

This study uses a panel-data framework to identify the determinants of the spread over US Treasuries of emerging market sovereign issues as well as of the creditworthiness of the issuers, where the latter is represented by the Institutional Investor’s creditworthiness index. We use a sample of…

At the end of the last decade, the real activity in Colombia underwent the sharpest recession of the last fifty years. We postulate a non-triangular structural VAR model (Amisano and Giannini, 1997) to describe the dynamics of output, prices, unemployment and wages during the last two decades.…

Some univariate time series properties of output Some univariate time series properties of output