Financial Inefficiency and Real Business Cycle in Colombia
AbstractIn a dynamic, stochastic, general equilibrium model,we explore the optimal response of the inhabitans of a closed economy to an inefficient ad hoc financial system that in its intermediation duty looses a fraction of aggregate savings which otherwise would become aggregate investment. The incidence over the cycle of shocks to average financial inefficiency and technology is analyzed, as well as the steady state welfare gain of a reduction in average financial inefficiency. The descriptive power of the model is assessed with Colombian data between 1970 and 1992. The results in the paper suggest that the model's predictions are largely consistent with aggregate behavior of the Colombian economy, making it possible to explore several issues of financial liberalization and deepening.
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Bibliographic InfoPaper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 127.
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Business Cycles; Financial Inefficiency; Artificial Economy.;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-04-02 (All new papers)
- NEP-DGE-2003-04-02 (Dynamic General Equilibrium)
- NEP-MAC-2003-04-02 (Macroeconomics)
- NEP-MFD-2003-04-02 (Microfinance)
- NEP-RMG-2003-04-02 (Risk Management)
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