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External Linkages and Economic Growth in Colombia

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Author Info

  • Pär Österholm
  • Lisandro Abrego

Abstract

This paper investigates the sensitivity of Colombian GDP growth to the surroundingmacroeconomic environment. We estimate a Bayesian VAR model with informative steady-statepriors for the Colombian economy using quarterly data from 1995 to 2007. A variancedecomposition shows that world GDP growth and government spending are the most importantfactors, explaining roughly 17 and 16 percent of the variance in Colombian GDP growthrespectively. The model, which is shown to forecast well out-of-sample, can also be used toanalyse alternative scenarios. Generating both endogenous and conditional forecasts, we showthat the impact on Colombian GDP growth of a substantial downturn in world GDP growthwould be non-negligible but still a mild decline by historical standards.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/46.

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Length: 24
Date of creation: 01 Feb 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/46

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Related research

Keywords: Economic growth; Private investment; Forecasting models; gdp growth; forecasting; mean square; real gdp; logarithm; equation; survey; growth rate; gdp growth rate; correlation; statistics; econometrics; polynomial; standard deviation; parsimonious model; growth rates; equations; covariance; global economic growth; random walk; predictions; error variance; samples; probability;

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References

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  1. Norman Loayza & Pablo Fajnzylber & César Calderón, 2004. "Economic Growth in Latin America and The Caribbean: Stylized Facts, Explanations, and Forecasts," Working Papers Central Bank of Chile 265, Central Bank of Chile.
  2. Jeromin Zettelmeyer, 2006. "Growth and Reforms in Latin America," IMF Working Papers 06/210, International Monetary Fund.
  3. Villani, Mattias & Warne, Anders, 2003. "Monetary policy analysis in a small open economy using Bayesian cointegrated structural VARs," Working Paper Series 0296, European Central Bank.
  4. Campbell, John Y & Shiller, Robert J, 1991. "Yield Spreads and Interest Rate Movements: A Bird's Eye View," Review of Economic Studies, Wiley Blackwell, vol. 58(3), pages 495-514, May.
  5. Pär Österholm, 2008. "Can forecasting performance be improved by considering the steady state? An application to Swedish inflation and interest rate," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 27(1), pages 41-51.
  6. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1997. "Monetary Policy Rules in Practice: Some International Evidence," CEPR Discussion Papers 1750, C.E.P.R. Discussion Papers.
  7. Jeromin Zettelmeyer & Pär Österholm, 2007. "The Effect of External Conditionson Growth in Latin America," IMF Working Papers 07/176, International Monetary Fund.
  8. Malin Adolfson & Michael K. Andersson & Jesper Lindé & Mattias Villani & Anders Vredin, 2007. "Modern Forecasting Models in Action: Improving Macroeconomic Analyses at Central Banks," International Journal of Central Banking, International Journal of Central Banking, vol. 3(4), pages 111-144, December.
  9. Mattias Villani, 2009. "Steady-state priors for vector autoregressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(4), pages 630-650.
  10. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
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Citations

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Cited by:
  1. Lavan Mahadeva & Javier Gómez Pineda, . "The international cycle and Colombian monetary policy," Borradores de Economia 557, Banco de la Republica de Colombia.
  2. Rupa Duttagupta & N. Barrera, 2010. "The Impact of the Global Crisison Canada," IMF Working Papers 10/5, International Monetary Fund.
  3. Daniel Leigh, 2008. "Achieving a Soft Landing," IMF Working Papers 08/69, International Monetary Fund.
  4. Juan José Echavarría & Andrés González & Enrique López & Norberto Rodríguez, 2012. "Choques internacionales reales y financieros y su impacto sobre la economía colombiana," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
  5. Enrique Flores & Daniel Leigh & Benedict J. Clements, 2009. "Monetary and Fiscal Policy Options for Dealing with External Shocks," IMF Working Papers 09/59, International Monetary Fund.

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