Working Papers on Economics

This study implements a regular vine copula methodology to evaluate the level of contagion among the exchange rates of six Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico and Peru) from June 2005 to April 2012. We measure contagion in terms of tail dependence coefficients,…

Using data from the 2010 Colombia Demographic and Health Survey and of the National Survey of the Nutritional Situation in Colombia (ENDS-ENSIN), we analyzed the evolution of the height for the Colombian birth cohorts in the period 1946-1992 by ethnic groups defined through self-classification.…

We apply a pair-wise approach to test the law of one price for deposit (lending) rates in Colombia. We find that when banks are of different size deposit rates adjust quickly, suggesting a competitive environment. By contrast, lending rates adjust rapidly when banks are of similar size,…

In this document we use the Expectations Survey conducted monthly by the Central Bank of Colombia during the period of October 2003 – August 2012. We find that exchange rate revaluations were generally followed by expectations of further revaluation in the short run (1 month), but by…

As a result of the most recent global financial crisis literature has embraced size, connectedness and substitutability as key indicators for financial institutions’ systemic importance. Despite the intuitiveness of these concepts, identifying systemic important institutions remain a non-trivial…

Informational constraints may turn the Merton Model for corporate credit risk impractical. Applying this framework to the Colombian financial sector is limited to four stock-market-listed firms; more than a hundred banking and non-banking firms are not listed. 

This paper investigates the impact of sovereign risk on the stochastic rational expectations equilibrium of a pure exchange small open economy. International borrowing and lending arise from the interaction between a risk averse sovereign representative agent in a small open economy trying to…

The world economy has recently been hit by commodity price fluctuations, with first round effects on noncore inflation and second round effects on core inflation. The policy response to commodity price fluctuations depends on the first and second round effects as well as on the strength of the…

This paper provides empirical evidence of the impact of fiscal decentralization on Colombia's public basic education. Based on the social and economic data available for 1,003 municipalities and 13,670 public schools, for the last decade, we confirmed that decentralization has had a positive and…

We assess the effects of the Colombian Unemployment Subsidy (US) program on future labor participation, unemployment, formality, school attendance and earnings of its beneficiaries, on household earnings and school attendance of the household members, and on weight and height of their children…

In the context of financial crises influenced by the development and burst of housing price bubbles, the detection of exuberant behaviors in the financial market and the implementation of early warning diagnosis tests are of vital importance. This paper applies the new method developed by…

We use a unique data set at the individual level to estimate an empirical model explaining the probability of young individuals to become criminals as a function of the presence of adult criminals in their neighborhoods, an a complete set of control variables, including census sector fixed…

This paper investigates whether transforming the Consumer Price Index with a class of power transformations lead to an improvement of inflation forecasting accuracy. We use one of the prototypical models to forecast short run inflation which is known as the univariate time series ARIMA . This…

Banco de la República’s FX intervention policy is described, with a focus on its objectives and main features. Then, based on a survey of the effectiveness of sterilized intervention in Colombia, it is argued that this tool is not useful to cope with the challenges posed by medium term external…

In this paper we develop a dynamic stochastic general equilibrium fiscal model for the Colombian economy. The model has three main components: the existence of non-Ricardian households, price and wage rigidities, and a fiscal authority that finances government spending partly with public debt.…

The paper examines the bidders behaviour in the Colombian government bond auctions during 2007 for the period in which there is no uncertainty in the supply. Three main findings are presented. First, in contrast with other treasury auctions (Castellanos [2]), the market clearing price in the…

This document explores the predictive power of the yield curves in Latin America (Colombia, Mexico, Peru and Chile) taking into account the factors set by the specifications of Nelson & Siegel and Svensson. Several forecasting methodologies are contrasted: an autoregressive model, a vector…