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The same monetary policy rate decision does not have uniform effects across regions of the country. Regions experiencing larger declines in inflation also tend to exhibit more pronounced slowdowns in economic activity and employment. This finding suggests that regional heterogeneity primarily…

Despite the growth of modern services, Colombia’s foreign trade remains concentrated in traditional services. This poses challenges for diversifying the export basket and for promoting more differentiated, higher-technology services that can be more easily integrated into global value chains.

Banco de la República has a highly effective instrument in the policy rate to achieve its objectives. However, uncertainty reduces that effectiveness; therefore, when uncertainty is higher, the Bank needs to act more forcefully to achieve the same objective.

In the Colombian labor market, possessing a broad and diverse set of skills and knowledge—beyond basic requirements for each occupation—can make a significant difference in wage determination. 

ApproachThis study updates the 4GM model used by Banco de la República (the Central Bank of Colombia) for monetary policy analysis. The update explicitly incorporates labor‑market dynamics, including the evolution of the unemployment rate and wages. The aim is to capture how labor‑market conditions…

AbstractWe study the financial and real effects of a wealth tax reform in Colombia that included a large share of small and medium-sized enterprises (SMEs) as new taxpayers. The tax was introduced in response to a severe weather shock that affected several regions of the country. We use a unique…

In Colombia, one in every five young people between the ages of 15 and 24 is neither studying nor working; these individuals are known as NEETs (Not in Education, Employment, or Training). This paper contributes to the analysis of NEET status in Colombia by adopting a cohort perspective. Using this…

Demographic change represents not only a challenge but also an opportunity to rethink the financing structure and target investment toward key areas such as expanding early‑childhood and upper‑secondary education coverage, enhancing equity, strengthening teacher training, improving the student…

How can climate change affect food prices? This paper examines how extreme changes in precipitation and temperature have differentiated effects on wholesale food prices in Colombia. The results show that average climatic conditions across the country explain most of the observed price fluctuations.…

Since: 1994

This paper identifies Okun´s law in Colombia between 1984 and 2016 using a Vector Error Correction Model (VECM) as there is evidence of a long-term relationship between the unemployment rate and the GDP. Results suggest that after a one percent increase in GDP, the unemployment rate is reduced by 0…

The analysis shows how the demand for cash and checks from 1923 to 2023 was shaped by economic activity, inflation dynamics, the development of the financial system, technological innovation, and significant historical shocks such as wars, political instability, or the Covid-19 pandemic.

This paper presents a methodology to estimate the intraday liquidity that systemically important entities (SIE) need to fulfill all its obligations in a timely fashion, when a simulated failure-to-pay from its main liquidity supplier by discretionary concepts of payment occurs. Using the Bank of…

AbstractIn this paper, we study the coexistence of cash and electronic payments introducing some distortions in the payments markets to understand the widespread use of cash, specially in emerging countries. Following Lagos and Wright (2005) we model explicitly some frictions in the…

We study the network of Colombian sovereign securities settlements. With data from the settlement market infrastructure we study financial institutions’ transactions from three different trading and registering individual networks that we combine into a multi-layer network.

AbstractCash is still widely used in Colombia, even among merchants that accept payment cards. Indeed, 60% of these merchants use dissuasive strategies to make their clients pay with cash. This shows that merchant service costs (MSC) for cards are not optimal in the sense of the Tourist Test. We…

The financial soundness of Central Banks (CBs) may be a necessary condition for achieving their objectives. Banco de la República (the Central Bank of Colombia) has a legal framework that grants it administrative, equity, and technical autonomy, as well as mechanisms that help preserve its capital…

In this paper we analyze the effects of financial constraints on the exchange rate through the portfolio balance channel. Our contribution is twofold: First, we construct a tractable two-period general equilibrium model in which financial constraints inhibit capital flows. Hence, departures from…

In the present paper we remark that the absence of an intrinsic or fundamental value represents a problem for the stability of the bitcoin’s price as an asset. In addition, we consider some financial stability concerns that derive from the hypothesis that the bitcoin will survive as an asset…

Despite various payment innovations, today, cash is still heavily used to pay for low-value purchases. This paper develops a simulation model to test whether standard implications of the theory on cash management and payment choices can explain the use of payment instruments by transaction size. In…

"This document illustrates how changes in the risk composition of the portfolio amplified the transmission of monetary policy to average loan interest rates throughout the credit cycle and demonstrates the value of disaggregated data for understanding the macro-financial conditions of the economy." 

Estimates indicate a positive relationship between the duration of drought periods and the total credit granted and the number of beneficiaries at the municipal level. This relationship holds for credits whose debtors report high levels of assets or have the backing of a public guarantee fund.

AbstractThe housing sector is one of the most relevant in terms of economic and financial stability. Understanding its behavior can prevent bubbles and busts in the economy. There are many studies about the corporate bond’s spreads, but the studies about mortgage interest rate spread and…

We evaluate the effectiveness of consumer debt moratoria, one of the earliest policy interventions aimed at alleviating debt burdens. Using administrative data from Colombia, our study compares households that narrowly qualified for the moratorium (eligible up to 60 days overdue on their mortgages)…

Using monthly information on retail trade, we study the short-term dynamics of household consumption variations in Colombia. Based on a sample of retail trade excluding fuels and vehicles, we find that the growth of household consumption can be explained by lags in the Economy Monitoring Indicator…