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Financial Accelerator Mechanism in a Small Open Economy

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  • Martha R. López

    ()

  • Juan D. Prada

    ()

  • Norberto Rodríguez Niño

    ()

Abstract

Using Bayesian estimation techniques, we estimate a small open economyDSGE model with credit-market imperfections for the Colombian economy. Us-ing the estimated model we investigate what are the sources of business cycle°uctuations. We show that balance-sheet e®ects play an important role in ex-plaining recent Colombian business cycles. We then perform a counterfactualexercise that shows that ¯xed exchange rate regime could have exacerbated the¯nancial distress in the economy between 1998-1999.

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Bibliographic Info

Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 004992.

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Length: 31
Date of creation: 18 Aug 2008
Date of revision:
Handle: RePEc:col:000094:004992

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Keywords: DSGE modelling; Financial Accelerator; Bayesian Estimation.;

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  1. Mark Gertler & Simon Gilchrist & Fabio Natalucci, 2003. "External Constraints on Monetary Policy and the Financial Accelerator," NBER Working Papers 10128, National Bureau of Economic Research, Inc.
  2. Bernal Raquel, 2003. "Monetary Policy Rules in Colombia," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.
  3. Ben Bernanke & Mark Gertler, 2000. "Monetary Policy and Asset Price Volatility," NBER Working Papers 7559, National Bureau of Economic Research, Inc.
  4. Peter N. Ireland, 2002. "Endogenous Money or Sticky Prices?," NBER Working Papers 9390, National Bureau of Economic Research, Inc.
  5. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  7. Roberto Chang & Andres Velasco, 1998. "Financial crises in emerging markets: a canonical model," Working Paper 98-10, Federal Reserve Bank of Atlanta.
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Cited by:
  1. Juan David Prada Sarmiento, 2008. "Financial Intermediation and Monetary Policy in a Small Open Economy," BORRADORES DE ECONOMIA 005010, BANCO DE LA REPÚBLICA.
  2. Lavan Mahadeva & Javier Gómez Pineda, . "The international cycle and Colombian monetary policy," Borradores de Economia 557, Banco de la Republica de Colombia.
  3. Fernando Tenjo & Martha López, . "Early Warning Indicators for Latin America," Borradores de Economia 608, Banco de la Republica de Colombia.
  4. Johana Maritsa Hernández Henao & Last: Hernández Henao, 2013. "Demanda externa, términos de intercambio y el papel de la política monetaria durante la crisis de 2008," Documentos de Investigación - Research Papers 7, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
  5. Ramiro Rodríguez Revilla, 2011. "Modelos de equilibrio general dinámicos y estocásticos para Colombia 1995-2011," REVISTA ECOS DE ECONOMÍA, UNIVERSIDAD EAFIT.

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