E58


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A Historical Analysis of Central Bank Independence in Latin America: The Colombian Experience, 1923-2008

This paper explores the relationship between central bank independence and inflation in Latin America, using as a case study the experience of Colombia (1923-2008). Since its creation, in 1923, Colombia’s central bank has undergone several reforms that have changed its objectives and degree of...

A Survey on the Effects of Sterilized Foreign Exchange Intervention

In this paper we survey prominent theories that have shaped the literature on sterilized foreign exchange interventions. We identify three main strands of literature: 1) that which advocates the use of sterilized interventions; 2) that which deems sterilized interventions futile; and 3) that...

An Asset Allocation Framework with Tranches for Foreign Reserves

This document explores an alternative strategic asset allocation framework for foreign exchange reserves, whose main purpose is to maximize the risk-adjusted returns maintaining the objectives of liquidity and safety of a foreign reserves’ portfolio.   The overall portfolio can be fragmented...

An Empirical Analysis of the Relationship between US and Colombian Long-Term Sovereign Bond Yields

We study the relationship between US and Colombian sovereign debt interest rates. We also evaluate the response of the Colombian long-term bond yield and other asset prices to shocks to the US long-term Treasury rate. Two empirical exercises are performed. First, we use a moving window linear...

An Empirical Analysis of the Relationship between US and Colombian Long-Term Sovereign Bond Yields

We study the relationship between US and Colombian sovereign debt interest rates between 2004 and 2013. We also evaluate the response of the Colombian long-term bond yield and other asset prices to shocks to the US long-term Treasury rate. Two empirical exercises are performed. First, we use a...

Announcements are not Enough: Foreign Exchange Intervention under Imperfect Credibility

Central banks in emerging countries frequently build-up (diminish) reserves while attempting to depreciate (appreciate) their domestic currencies. Even if these interventions are effective, they often entail various costs. Basu (2012), nonetheless, proposes a model in which the sole announcement...

Are Capital Controls and Central Bank Intervention Effective?

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...

Assessing Reserve Adequacy: The Colombian Case

International reserves are very important for emerging economies, as they allow to buffer possible liquidity vulnerabilities within a countries' balance of payments. Consequently, the issue of how many reserves should each country hold is a relevant issue for economic policy. The literature has...

Banking Limits on Foreign Holdings: Disentangling the Portfolio Balance Channel

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...

Beyond Bubbles: The role of asset prices in early-warning indicators

Asset prices have recently become a common topic in economic debate. Nevertheless, much time has been spent in determining if they effectively exhibit a bubble component, and not in examining whether asset prices affectively contain relevant information concerning future market developments....

Central Bank Independence and Foreign Exchange Policies in Latin America

The purpose of this paper is to analyze the links between central bank independence and foreing exchange policies, in the light of the recent experience of the major Latin American countries. To that end, the paper starts with a brief review of the literature on the subject. The second section...

Central Banks: Past, Present, Future

This paper looks at the question of central bank mandate and design in a larger historical context with the goal of understanding the rationale for the design of the European Central Bank (ECB), and also of developing a better understanding of how central banks will evolve over the next few...

Changes in GDP’s measurement error volatility and response of the monetary policy rate: Two approaches

Using a stylized model in which output is measured with error, we derive the optimal policy response to the demand shock signal and to changes in the measurement error volatility from two different perspectives: the minimization of the expected loss (from which we derive the ‘standard’ policy)...

Changes in GDP’s measurement error volatility and response of the monetary policy rate: two approaches

Using a stylized model in which output is measured with error, we derive the optimal policy response to the demand shock signal and to changes in the measurement error volatility from two different perspectives: the minimization of the expected loss (from which we derive the ‘standard’ policy)...

Colombia‘s Recent History of Monetary Policy from 1990 to 2010

 

Commodity Price Fluctuations, Core Inflation and Policy Interest Rates

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...

Commodity Price Shocks and Inflation within An Optimal Monetary Policy Framework: The case of Colombia

A small open macroeconomic model, in which an optimal interest rate rule emerges to drive the inflation behavior, is used to model inflation within an inflation targeting framework. This set up is used to estimate the relationship between commodity prices shocks and the inflation process in a...

Effects of Reserve Requirements in an Inflation Targeting Regime: The Case of Colombia

The Colombian economy and financial system have coped reasonably well with the effects of the global financial crisis. Hence, “unconventional” policy measures have not been at the center of the policy decisions and discussions. Nominal short term interest rates have remained the main monetary...

Estimating the COP Exchange Rate Volatility Smile and the Market Effect of Central Bank Interventions: A CHARN Approach

 

Evaluating the Impact of Macroprudential Policies in Colombia's Credit Growth

Macroprudential tools have been used around the world as a mechanism to control potential risks and imbalances in the financial sector. Colombia is a good example of a country that has employed different regulatory measures to manage systemic risks in the economy. The purpose of this paper is to...

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This content has been translated into English for informational purposes. Upon any query regarding its interpretation or enforceability, the Spanish version shall be deemed official, and will prevail over the English version. The authors of specific texts such as working papers or articles select the language of publication; therefore, there might be cases in which the content may only be available in English. Este contenido ha sido traducido al inglés con fines informativos. En caso de duda sobre su interpretación y/o aplicación, se entenderá que la versión en español es la versión oficial y prevalecerá sobre aquella en inglés. Para casos particulares como documentos de trabajo o artículos, el idioma original de publicación es escogido por el autor, por lo cual puede haber casos en los que el contenido esté disponible sólo en inglés.  

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