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Recent Behavior of Output, Unemployment, Wages and Prices in Colombia:What went Wrong?

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  • Luis Eduardo Arango

    ()

  • Ana María Iregui

    ()

  • Luis Fernando Melo

    ()

Abstract

At the end of the last decade, the real activity in Colombia underwent the sharpest recession of the last fifty years. We postulate a non-triangular structural VAR model(Amisano and Giannini, 1997) to describe the dynamics of output, prices, unemployment and wages during the last two decades. The evidence suggests that, in the long-run, monetary policy has been neutral to both output and unemployment while the main reasons for the increase in the latter have been the lack of credibility of monetary policy, the way in which wages are set and the increase in non-wage labor costs.

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Bibliographic Info

Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 249.

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Handle: RePEc:bdr:borrec:249

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Keywords: Structural VAR; unemployment; monetary policy; wages; expectations;

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  1. Martha Misas A. & Carlos Esteban Posada, 2000. "Crecimiento y Ciclos Económicos en Colombia en el siglo XX: El Aporte de un VAR Estructural," BORRADORES DE ECONOMIA 002229, BANCO DE LA REPÚBLICA.
  2. Olivier Jean Blanchard & Danny Quah, 1990. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
  3. Martha Misas Arango & Enrique López Enciso, 1998. "El Producto Potencial En Colombia: Una Estimación Bajo Var Estructural," BORRADORES DE ECONOMIA 002538, BANCO DE LA REPÚBLICA.
  4. Fabiani, Silvia & Locarno, Alberto & Oneto, Gian Paolo & Sestito, Paolo, 2001. "The sources of unemployment fluctuations: an empirical application to the Italian case," Labour Economics, Elsevier, vol. 8(2), pages 259-289, May.
  5. Juan J. Dolado & Juan F. Jimeno, . "The causes of Spanish unemployment: A structural VAR apporach," Working Papers 96-19, FEDEA.
  6. Algan, Yann, 2000. "How well does the Aggregate Demand - Aggregate Supply framework explain unemployment fluctuations? A France - United States Comparison," Open Access publications from Sciences Po info:hdl:2441/8886, Sciences Po.
  7. Balmaseda, Manuel & Dolado, Juan J & Lopez-Salido, J David, 2000. "The Dynamic Effects of Shocks to Labour Markets: Evidence from OECD Countries," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 3-23, January.
  8. Ana María Iregui & Jesús Otero, 2002. "On The Dynamics Of Unemployment In A Developing Economy: Colombia," BORRADORES DE ECONOMIA 003298, BANCO DE LA REPÚBLICA.
  9. Martha Misas & Enrique López, 2001. "Desequilibrio Reales En Colombia," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
  10. Olivier J. Blanchard & Lawrence H. Summers, 1989. "Hysteresis in Unemployment," NBER Working Papers 2035, National Bureau of Economic Research, Inc.
  11. Luis Eduardo Arango, . "Temporary and Permanent Components of Colombia's Output," Borradores de Economia 096, Banco de la Republica de Colombia.
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Cited by:
  1. Martha Misas Arango & Enrique López Enciso & Juana Téllez Corredor & José Fernando Escobar, . "La Inflación Subyacente en Colombia: Un Enfoque de Tendencias Estocásticas Comunes Asociadas a un VEC Estructural," Borradores de Economia 324, Banco de la Republica de Colombia.
  2. Juan Carlos Parra Alvarez, 2008. "Hechos Estilizados de la Economía Colombiana:Fundamentos Empíricos para la Construcción y Evaluación de un Modelo DSGE," BORRADORES DE ECONOMIA 004602, BANCO DE LA REPÚBLICA.

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