Working Papers on Economics

We use hazard models to study the determinants of housing price bubbles’ duration. We answer two related questions: i). Does prolonged domestic monetary policy easing increase the duration of housing price bubbles? And, ii). Does prolonged monetary policy easing in the US influences housing…

The international financial crisis of 2007-2009 strongly affected asset prices, risk and growth in the advanced economies, leading to large capital movements between these economies and the emerging countries. The capital movements were reflected in sharp fluctuations in the emerging countries’…

Can technological misallocation generate financial frictions? We build a theoretical model with testable implications, in which the misallocation between R&D and production activities generates borrowing constraints. The investor offers the innovator a rent that is contingent to the success…

In this paper, we build a heterogeneous agents-dynamic general equilibrium model wherein saving constraints interact with credit constraints. Saving constraints in the form of fixed costs to use the financial system lead households to seek informal saving instruments (cash) and result in lower…

The paper assesses the role of taxes on investment in Colombian firms. The analysis is carried out at the firm level for the period 2003-2014. During this period, the national government set five different tax reforms, including changes in the statutory tax rates, tax credits and incentives for…

Central banks generally target multiple objectives while having at least the same number of monetary instruments. However, some instruments can be inadvertently collinear, leading to indeterminacy and identification failures. Paradoxically, most empirical studies have shied away from this…

We study the determinants of sovereign default risk for a group of 23 OECD countries using quarterly data spanning the period between 2000:Q1 and 2016:Q3. Applying the recently developed panel dynamic heterogeneous common correlated effects estimator of Chudik and Pesaran [2015] our study…

We use the recently developed panel rank-cointegration test proposed by Pedroni et al. [2015] to check for the stability conditions of the cross-country money market interest rate bases. Using weekly information on short-term interest rates and spot and forward exchange rates for a set of 20…

This paper examines inflation expectations of the World Economic Survey for ten inflation targeting countries. First, by a Self Organizing Maps methodology, we cluster the trajectory of agents inflation expectations using the beginning of the oil price shock occurred in June of 2014 as a…

This study reports evidence of the existence of house price bubbles in several Canadian provinces around the recent global financial crisis. Using a wealth of monthly data for about a thirty-year period we find evidence supporting the hypothesis that the bubble in Quebec transmitted to four…

In an open-economy model with financial constraint, Schmitt-Grohé and Uribe (2017) propose an expression for a capital control policy. From this expression, they argue that the optimal tax, i.e. the one that solves the overborrowing problem, is indeterminate when crises occur (i.e. when the…

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…