Working Papers on Economics

Evidence of the causal long-term relationship between budget deficit, money growth and inflation in Colombia is analyzed in this paper, considering the standard (M1), the narrowest (M0-Base) and the broadest (M3) definitions of money supply. Using a vector error correction (VEC) model with…

The demographic transition from high to low mortality and fertility rates was one of the most important structural changes during the twentieth Century in most Latin American economies. This paper uses a simple economic framework based on Galor and Weil (2000) for understanding the main forces…

In this paper we find empirical evidence of bank lending channel for Colombia, using a balanced panel data of about four thousand non-financial firms. We find that increases in the interest rate, proxiing for the monetary policy instrument, lead to a reduction in the proportion of bank loans,…

A minimum performance insurance in the Principal-Agent problem is wealth reducing to the principal. This result points to further inefficiencies in mandatory individual Pension Funds' contracts, particularly the one established in the 1993's 100th Law in Colombia.

We use a dynamic factor model proposed by Stock and Watson [1998, 1999, 2002a,b] to forecast Colombian inflation. The model includes 92 monthly series observed over the period 1999:01-2008:06. The results show that for short-run horizons, factor model forecasts significantly outperformed the…

The focus of this paper is on the short-term macroeconomic effects of fiscal policy in Colombia in a structural vector autoregression context. Government spending shocks are found to have positive and significant effects on output, private consumption, employment, prices and short-term interest…

The objective of this paper is to analyze how international cycles affect the real GDP cycle and so monetary policy decisions in Colombia. We estimate that cycles in world GDP, export prices and capital inflows are strongly associated with the Colombian business cycle both on impact and even…

The assessment of inflationary pressures in Colombia has faced two important challenges in the present decade. The first one occurred in 2006 and consisted of detecting an overheating economy in the midst of fast growing investment and increasing measured productivity. The second challenge took…

 If theory-consistent models can ever hope to forecast well and to be useful for policy, they have to relate to data which though rich in information is uncertain, unbalanced and sometimes forecasts from external sources about the future path of other variables. One example from many is…

This paper presents an estimation of credit quality transition matrices for commercial banks in Colombia, using a duration hazard function model, and following the methodology proposed by Gómez-González et al (2009). Using a test developed by Weißbach et al (2005), we test for the time-…

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…

This paper analyses a comprehensive dataset on migration using robust econometric methodologies to assess a range of economic and social impacts of migration on individuals and households left behind. Our findings indicate that there is no significant impact on labour force participation in…

An application of Bayesian Model Averaging, BMA, is implemented to construct combined forecasts for the colombian inflation for the short and medium run. A model selection algorithm is applied over a set of linear models with a large dataset of potencial predictors using marginal as well as…

This work analyzes the relationship between real interest rates and commodity prices. According to Frankel’s hypothesis (1986-2006): “low real interest rates lead to high real commodity prices”. However, some empirical evidence suggests that commodity prices can predict monetary policy. In this…

This paper uses a wage setting survey of 1,305 Colombian firms to explore the nature and sources of wage rigidities. This is the first study of a non-European emerging economy that uses evidence from a survey of firms to analyse this topic. The survey was carried out during the first half of…

We use occupations descriptions for Brazil, Colombia and Mexico, to build computer-use related tasks intensities, and link then to series of cross sections of data of each country in order to empirically assess to what extent the observed empirical regularities, and the reallocation of workers…

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…