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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...

Capital Account Controls, Bank’s Efficiency, Growth and Macroeconomic Volatility in the FLAR’s Member Countries

This paper evaluates the effects of capital account controls adopted in the past years by the FLAR’s member countries (Bolivia, Colombia, Costa Rica, Ecuador, Perú and Venezuela) on the efficiency of the banking sector, the economic growth and the volatility of output, consumption, and...

Capital Flows and Financial Assets in Colombia: Recent Behavior, Consequences and Challenges for the Central Bank

This paper analyzes the evolution and impact of capital flows in Colombia over the past five years. An examination of the nature and composition of the capital flows indicates that to large extent they have originated in foreign direct investment, especially in the oil and mining sectors. The...

Capital Flows and Monetary Policy

Capital inflows and outflows often remind policymakers of the monetary policy “trilemma” and the several associated dilemmas. To tackle these dilemmas, an equilibrium model of capital flows is proposed. The model captures bouts of capital inflows and outflows with shocks to the emerging-market...

Current Account Sustainability in Latin America Considering Nonlinearities

We test current account sustainability based on the framework developed by Hakkio and Rush [1991] and Husted [1992] using a two-regime threshold vector error correction model. This methodology allows us to characterize short-run nonlinearities in the current account. We estimate the model for...

Do the Different Types of Capital Flows Respond to the Same Fundamentals and in the Same Degree? Recent evidence for emerging markets

The international crisis by the end of the previous decade brought very important changes in terms of degree, size, and volatility of capital flows to emerging markets. These became a challenge for their economic authorities because the negative effects likely to affect macroeconomic variables...

Foreign Exchange Intervention in Colombia

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...

Gross Capital Flows and their long-term Determinants for Developing Economies: A Panel Co-integration Approach

The purpose of this paper is to estimate a model for gross capital flows for a sample of developing economies and assess their long-term determinants by using a panel co-integration approach. Results indicate that there is a co-integration relationship between key push and pull factors and gross...

Optimal v. simple financial policy rules in a production economy with “liability dollarization”

We evaluate the effectiveness of financial policy rules in a small open economy with production, liability dollarization and “unconventional shocks” (global liquidity shifts and news about future fundamentals). Tradable and nontradable final goods are produced with tradable inputs. Debt is...

Optimum and Adequate Level of International Reserves

When managing international reserves, central banks generally face the problem of determining what their optimum or adequate level is.  A critical review of some methodologies for calculating the optimum amount of reserves is presented in this document.

Output gaps and stabilisation policies in Latin America: The effect of commodity and capital flow cycles

We provide a measure of the output gap that filters out the impact of the commodity and net capital inflows booms for Latin American countries. These two factors temporarily boost output and so are likely to push up estimates of potential growth in the region to unrealistic levels, thereby...

Risk, Aggregate Demand, and Commodity Prices: An Application to Colombia

We embed a small open economy model for Colombia into the global risk model of Gómez-Pineda, Guillaume, and Tanyeri (2014). The small open economy model is estimated by Bayesian methods and used for analysis and projections. The model enable us to give a consistent treatment of shocks to global...

Systemic Risk, Aggregate Demand, and Commodity Prices

The paper presents a global model for analysis and projections. The model features a handful of elements that make it suitable for analyzing three broad sets of topics; first, systemic risk and its transmission to country risk premiums; second, the transmission from country risk premiums to...

The Case for Macro Risk Budgeting and Portfolio Tranching in Reserves Management

The Case for Macro Risk Budgeting and Portfolio Tranching in Reserves Management

The macroprudential policy framework in Colombia

Macroprudential policy in Colombia is described along with a discussion of the main challenges faced by the authorities in implementing it and a review of episodes in which macroprudential measures were taken. An overview and some estimates of their effectiveness in preventing the buildup of...

The Size of Fiscal Multipliers and the Stance of Monetary Policy in Developing Economies

In this paper we estimate the effect of government consumption shocks on GDP using a panel of 21 developing economies. Our goal is to better understand the reasons for the low fiscal multipliers found in the literature by performing estimations for alternative exchange rate regimes, business-...

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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