Working Papers on Economics

The recent financial crisis has brought to the forefront the need of a better understanding of the transmission mechanisms of monetary policy. The main step forward in this direction has drawn on work aimed at stressing the role of the financial sector in this transmission. Particular emphasis…

Whilst emphasis has been given to short-term dependence of financial returns, long-term dependence remains overlooked. Despite financial literature provides evidence of long-term´s memory existence, serial-independence assumption prevails.   This document´s long-term dependence…

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…

Three methodologies to estimate the natural interest rate, NIR, are implemented for the Colombian economy. Two methods are statistical filters and the third involves some economic theory. The first method is based on unobserved components decomposition of the real interest rate and explores the…

The existence of wage differentials across sectors is a widely observed phenomenon. This paper provides new elements to understand inter and intra-sectoral wage differentials in Colombia by analysing a wage setting survey of 1305 firms and emphasizing the role of firm characteristics. The…

This paper provides evidence of positive externalities in human capital that help to explain divergences in development worldwide. We estimate the supply and demand for human capital using a five-year panel involving 60 countries and covering the period 1980-2000, and found that there exist…

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…

We assess the effect of the homicide rate, individual´s perception of security in their neighborhood of residence, and of the effect of their having been victimized, on life satisfaction. We find a negative effect of the homicide rate on life satisfaction for the subsample of individuals living…

A dynamic linear model for data revisions and delays is proposed. This model extends Jacobs & Van Norden's [13] in two ways. First, the "true" data series is observable up to a fixed period of time M. And second, preliminary figures might be biased estimates of the true series. Otherwise,…

Preliminary and delayed Colombian GDP reports are replaced with optimal in-sample now-casts of “true” GDP figures derived from a model for data revisions. The new GDP time series is augmented with optimal out-of-sample forecasts and back-casts of the “true” GDP figures derived from the same…

The role of the exchange rate and the exchange rate regime in the monetary policy decision-making process in Colombia is described. The rationale for the intervention of the Central Bank in the FX market is explained and the experience in this regard is reviewed. Special attention is given to…

In this document we lay out the microeconomic foundations of a dynamic stochastic general equilibrium model designed to forecast and to advice monetary policy authorities in Colombia. The model is called Policy Analysis Tool Applied to Colombian Needs (PATACON). In companion documents we present…

This paper analyzes the evolution and impact of capital flows in Colombia over the past five years. An examination of the nature and composition of the capital flows indicates that to large extent they have originated in foreign direct investment, especially in the oil and mining sectors. The…

We use hedonic price models to estimate the value households are willing to pay to avoid violent crime in the city of Bogotá. We find that households living in the highest socioeconomic level (stratum 6) pay up to 7.2% of their house values in order to prevent average homicide rates from…

The focus of this study is to build, from the ‘bottom-up’, a market with artificially intelligent adaptive agents based on the institutional arrangement of the Colombian Foreign Exchange Market (1994-1999) in order to determine simple agents’ design, rules and interactions that are sufficient to…

We present an investment process that: (i) decomposes securities into risk factors; (ii) allows for the construction of portfolios of assets that would selectively expose the manager to desired risk factors; (iii) perform a risk allocation between these portfolios, allowing for tracking error…

An empirical model of the pass-through of international to domestic food inflation is proposed. The inflation rates and exchange rates of China and India are found to be significant in explaining imported food inflation in Colombia, 10,000 miles away. Notwithstanding the recent increase in…

This paper offers some preliminary steps in the marriage of some of the theoretical foundations of the new economic geography with spatial computable general equilibrium models.  Modeling the spatial economy of Colombia using the traditional assumptions of CGE models makes little sense when…

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,…

The main purpose of this chapter is to summarize the information currently available on cocaine production and trafficking. The chapter starts by describing the available data on cocaine production and trade, the collection methodologies, (if available) used by different sources, the main biases…