Working Papers on Economics

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…

Abstract: This paper employs network analysis to study world trade from 1995 to 2014. We focus on the main connective features of the world trade network (WTN) and their dynamics. Results suggest that countries’ efforts to attain the benefits of trade have resulted in an…

Abstract: An audit study was conducted in Colombia following the protocols in Giné and Mazer (2017). Trained auditors visited multiple financial institutions, seeking credit and savings products. Consistent with Gabaix and Laibson (2006) and similar to Giné and Mazer (2017), the…

In this study we construct volatility spillover indexes for some of the major stock market indexes in the world. We use a DCC-GARCH framework for modelling the multivariate relationships of volatility among markets. Extending the framework of Diebold and Yilmaz [2012] we compute spillover…

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…

This paper estimates the local efficiency of the public provision of education in Colombia between 2007 and 2014. The empirical analysis relies on a multiproduct function that assesses public performance considering two types of education products: quality and enrolment. Results for Colombian…

The functioning of large-value payment systems (LVPSs) can be affected when some of its participants voluntarily decide to delay their payments until they can totally fund them with the payments received from other participants. This behaviour, known as the free-rider problem, can cause an under…

Fiscal multipliers are different across countries and according with economic circumstances. The studies about the effect of a government spending shock on output have focus their attention on the behavior of consumption. However, the crowding out of investment is also an important matter of…

Most of the literature on the effectiveness of foreign exchange intervention has yet to reach a general consensus. In part, this is due to the different estimation methods in which exogenous variation is identified. In this sense, the use of heavily-dependent parametric models can sometimes…

In 2013 Colombia implemented a tax reform which, among other things, reduced payroll taxes by a total of 13.5 percentage points of wages. In this paper we evaluate the effects of this component of the 2012 Colombian tax reform on firms’ formal employment and average wages. We construct a panel…

We estimate a model of real exchange rate determination which is based on interest rate, term structure and purchasing power parities. This model takes into account sovereign risk as a key determinant with possibly non-linear effects. Estimations are performed for five Latin-American economies:…

This paper is aimed to identify the main determinants of the structural unemployment rate (SUR) in Colombia. To this end, we initially look up theoretical determinants of structural unemployment as defined by a basic search and matching model. Then, we estimate different measures of the SUR…

We evaluate the impacts of attending a public university in Colombia on the academic achievement of graduates from higher education. Our measurement of academic achievement represents the progress made between the college entrance and graduation standardized test scores. We find that public…

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 Appendix provides a more detailed discussion of the technical results, including proofs of theorems reported in the main paper. For ease of reference notation and definitions are repeated from the main paper.

Abstract: We investigate the effectiveness of foreign exchange interventions using the Colombian experience as a case study. Recent theoretical work emphasizes the importance of financial sector balance sheets and capital flows in determining the effects of currency…

The balance sheet is a snapshot that portraits the financial position of a firm at a specific point of time. Under the reasonable assumption that the financial position of a firm is unique and representative, we use a basic artificial neural network pattern recognition method on Colombian banks…

In this paper output gaps that include financial cycle information are evaluated against models used in policy analysis by the Colombian central bank. Employing this dataset is no trivial matter, since policy related models are the only relevant yardstick, and emerging economies (such as…

This paper studies the effects of an in utero program on birth outcomes addressed to vulnerable pregnant women. We use information from the Buen Comienzo program, an initiative run by the local government of Medellin, the second largest city of Colombia. In order to identify the effects we…

This paper builds a general equilibrium model that incorporates banks, financial frictions, default and a capital requirements. Ex-ante heterogeneous households decide how much to save or borrow for the sake of consumption (consumer credit) or the provision of housing services(mortgages). These…