Working Papers on Economics

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…

This paper tests the importance of the financial structure of banks in the bank lending channel of monetary policy transmission in Colombia, using an unbalanced panel of 51 banks for the period of 1996:4-2014:8. We find that an increase in the interbank rate (proxy of the intervention rate) has…

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…

This paper evaluates the role of rural infrastructure on the performance of some agricultural crops in Colombia. The study utilizes geo-referenced cross sectional data of four crops, coffee, rice, beans and plantains, collected for the majority of municipalities. Using genetic matching models,…

In this paper we present estimates for the coefficients of a production function, and the corresponding total factor productivity (TFP) for the Colombian manufacturing industry during 2005{2013. We follow several structural microeconometric techniques to estimate the production function…

Even though international authorities encourage open and wide access to large value payment systems, the optimal level of access, or tiering, is still an open question. In the case of real-time gross settlement systems (RTGS), the level of access, or tiering, may be limited by the tradeoff…

In a previous paper (Parra-Polania and Vargas, 2015) we modify the financial constraint of a very standard model to incorporate the fact that international lenders take into account that taxes (or subsidies) affect borrowers’ income available for debt repayments, and find that ex-post…

In this paper we explore one of the oldest labour market phenomena documented in the literature: the added worker effect, which refers to the labour supply response of secondary workers to main earners´ job losses. To do so we take advantage of the panel data survey conducted by a Colombian…

We extend the framework of Diebold and Yilmaz [2009] and Diebold and Yilmaz [2012] and construct volatility spillover indexes using a DCC-GARCH framework to model the multivariate relationships of volatility among assets. We compute spillover indexes directly from the series of asset…

We study the existence and international migration of housing market bubbles, using quarterly information of twenty OECD countries for the period comprised between 1970 and 2015. We find that housing bubbles are present in all the countries included in our sample. Multiple bubbles are found in…

In this paper we study exchange rate effects due to shifts in the portfolio composition of the Colombian financial sector during 2003-2014. We first provide a theoretical understanding of the channel's transmission mechanism by modeling how the banking sector optimally allocates its portfolio…

The effect of the Global Financial Crisis (GFC) has been substantial across markets and countries worldwide. We examine how the GFC has changed the way equity markets group together based on the similarity of stock indices’ daily returns. Our examination is based on agglomerative clustering…

We examine how liquidity is exchanged in different types of Colombian money market networks (i.e. secured, unsecured, and central bank’s repo networks). Our examination first measures and analyzes the centralization of money market networks. Afterwards, based on a simple network optimization…

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…

Using the Colombian Annual Manufacturing Survey (EAM) between 2000 and 2013, this paper investigates the existence of heterogeneity in the labor demand within the industrial sector. Long run own-price, output and TFP elasticities vary across a variety of dimensions such as regions, sectors and…

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…