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This study examines the determinants of sovereign risk, focusing on the impact of geopolitical risk in emerging market economies (EMEs) sovereign risk metrics. Using local projection techniques, we evaluate the effects of geopolitical risk on credit default swaps (CDS) and EMBI indices in EMEs,…
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AbstractThis document studies the sources of liquidity used by financial entities that participate in the large-value payment system to meet their daily obligations. For this purpose, we design and implement an algorithm that breaks down the cash unit of these entities into different concepts of…
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Evidence suggests that the Colombian interbank funds market is an inhomogeneous and hierarchical network in which a few financial institutions fulfill the role of “super-spreaders” of central bank liquidity among market participants. Results concur with evidence from other interbank markets and…
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AbstractStable and strong lending relations among financial institutions have been credited as the mainstay of interbank markets and financial stability. They are an indicator of trust among financial institutions. From a network perspective, we measure how stable relations are in the…
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AbstractUnder the market discipline hypothesis, monitoring by interbank lenders may induce changes in either the price or availability of new interbank funds to borrower banks. However, the presence of interbank relationship lending has been evaluated based on the availability of funds…
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Considering the recent decline in the birth rate, the beginning of the decline in the labor force in Colombia would occur between 2043 and 2045.
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We examine how liquidity is exchanged in different types of Colombian money market networks (i.e. secured, unsecured, and central bank’s repo networks). Our examination first measures and analyzes the centralization of money market networks. Afterwards, based on a simple network optimization…
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This document presents an enhanced and condensed version of preceding proposals for identifying systemically important financial institutions in Colombia. Three systemic importance metrics are implemented: (i) money market net exposures network hub centrality; (ii) large-value payment system…
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Healthcare expenditure in Colombia is expected to increase by 35% over the next eight years, due to population aging, rising costs, and domestic policies. These trends, in a context of high levels of informality and affiliation to the subsidized regime, add significant pressure to public finances.
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This paper evaluates seven output gap models for real-time estimates, based on three criteria: stability of estimations on new observations, data revisions and/or methodological changes; inflation forecasting accuracy; and potential output response to structural economic shocks.
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AbstractAlthough Colombia has made significant progress in the access to transactional products offered by the financial system, their use by the public is still low, and merchants and consumers continue to use cash intensively. One of the reasons why Colombians prefer cash to make…
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Scale-free (inhomogeneous) connective structures with modular (highly clustered) hierarchies are ubiquitous in real–world networks. Evidence from the main Colombian payment and settlement systems verifies that local financial networks have self-organized into a modular scale-free architecture that…
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Transparency is often emphasized as a key element for central bank independence and the effectiveness of monetary policy. Between 2018 and 2019, the Central Bank of Colombia (Banco de la República) undertook a significant overhaul of its monetary decision-making process, which led to significant…
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A core goal of regulators and financial authorities is to understand how market prices convey information on the financial health of its participants. From this viewpoint we build an Early-Warning Indicators System (EWIS) that allows for identifying those financial institutions perceived as risky…
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Even though international authorities encourage open and wide access to large value payment systems, the optimal level of access, or tiering, is still an open question. In the case of real-time gross settlement systems (RTGS), the level of access, or tiering, may be limited by the tradeoff between…
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Economic activity nowcasting (i.e. making current-period estimates) is convenient because most traditional measures of economic activity come with substantial lags. We aim at nowcasting ISE, a short-term economic activity indicator in Colombia. Inputs are ISE’s lags and a dataset of payments made…
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AbstractWe present a general supervised machine learning methodology to represent the payment behavior of financial institutions starting from a database of transactions in the Colombian large-value payment system.
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AbstractMore than 60 countries in the world have already implemented instant payment systems (IPS). However, in many cases they have been operational mainly for person-to-person transactions. This study looks at the challenges IPS may face in developing economies like Colombia as they advance…
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The necessary effort to stabilize inflation is greater when credibility is low, requiring the implementation of stricter policies than usual to achieve the same inflation targets.
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Banco de la República (the Central Bank of Colombia) implemented pilot surveys and, in 2023, conducted a nationally representative survey of the adult population. This revealed important data, such as that 95% of Colombians have heard of the Bank, but only 44.6% identify it as responsible for…
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Large value payment flows can be disrupted by several types of failures such as operational incidents, problems experienced by the administrator of the payments settlement system, outages in the communications networks and the inability of a participant to submit payments due to insufficient…
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AbstractThe concept of centrality has been widely used to monitor systems with a network structure because it allows identifying their most influential participants.This monitoring task can be difficult if the number of system participants is considerably large or if the wide variety of centrality…
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AbstractCross-holding of securities in financial systems occurs when i) two financial institutions hold securities issued by each other or ii) more than two financial institutions hold securities issued by each other in a circular structure. Securities cross-holding is relevant for…
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We implement a modified version of DebtRank, a measure of systemic impact inspired in feedback centrality, to recursively measure the contagion effects caused by the default of a selected financial institution. In our case contagion is a liquidity issue, measured as the decrease in financial…
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Natural disasters affect both the level and volatility of sovereign risk premiums in emerging economies, whereas stock market only experience changes in volatility.
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