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An Optimal Fiscal Policy Rule for the Colombian Economy: A Dynamic Stochastic General Equilibrium Approach


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  • Juan Galvis
  • Juan Bedoya
  • Ruben Loaiza


This paper seeks to develop an optimal fiscal policy rule for the Colombian economy that interacts with the monetary policy in order to stabilize the product and inflation gap. It proposes a Dynamic Stochastic General Equilibrium model (DSGE) with nominal rigidities and proposes a fiscal rule that depends on the debt and product gap, with the objective of isolating external shocks for the public spending gap in this case a preference shock keeping the economy away from the steady-state

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Bibliographic Info

Article provided by Universidad de Antioquia, Departamento de Economía in its journal LECTURAS DE ECONOMÍA.

Volume (Year): (2011)
Issue (Month): 75 ()
Pages: 107-141

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Handle: RePEc:lde:journl:y:2011:i:75:p:107-141

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Postal: Lecturas de Economía, Departamento de Economía, Calle 67, 53-108, Medellin 050010, Colombia.

Related research

Keywords: Dynamic Stochastic General Equilibrium; fiscal policy; monetary policy; business cycles;

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