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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 M. Natalucci, 2003. "External constraints on monetary policy and the financial accelerator," BIS Working Papers 139, Bank for International Settlements.
  2. Chang, R. & Velasco, A., 1998. "Financial Crises in Emerging Markets: A Canonical Model," Working Papers, C.V. Starr Center for Applied Economics, New York University 98-21, C.V. Starr Center for Applied Economics, New York University.
  3. 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.
  4. Ireland, Peter N., 2003. "Endogenous money or sticky prices?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 50(8), pages 1623-1648, November.
  5. Bernal Raquel, 2003. "Monetary Policy Rules in Colombia," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.
  6. Ben Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Economic Review, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, issue Q IV, pages 17-51.
  7. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 64, University of Warwick, Department of Economics.
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Cited by:
  1. Fernando Tenjo & Martha López, 2010. "Early Warning Indicators for Latin America," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, BANCO DE LA REPÚBLICA - ESPE.
  2. Juan David Prada Sarmiento, 2008. "Financial Intermediation and Monetary Policy in a Small Open Economy," BORRADORES DE ECONOMIA, BANCO DE LA REPÚBLICA 005010, BANCO DE LA REPÚBLICA.
  3. 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, Centro de Estudios Monetarios Latinoamericanos, CEMLA 7, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
  4. Ramiro Rodríguez Revilla, 2011. "Modelos de equilibrio general dinámicos y estocásticos para Colombia 1995-2011," REVISTA ECOS DE ECONOMÍA, UNIVERSIDAD EAFIT, UNIVERSIDAD EAFIT.
  5. Lavan Mahadeva & Javier Gómez Pineda, . "The international cycle and Colombian monetary policy," Borradores de Economia 557, Banco de la Republica de Colombia.

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