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Evidence For A Financial Accelerator In A Small Open Economy, And Implications For Monetary Policy

Listed author(s):
  • MARTHA LÓPEZ

    ()

  • JUAN DAVID PRADA

    ()

  • NORBERTO RODRÍGUEZ

    ()

Using Bayesian estimation techniques, we estimate a small open economy dynamic stochastic general equilibrium model with credit-market imperfections for the Colombian economy. We show that the combination of balance sheet effects and the choice of monetary policy regime are likely to play an important role in the magnification and propagation of initial shocks to the Colombian economy. As an application we show that our model explains the 1998-1999 crisis in Colombia, when a sharp rise in spreads on a relatively small proportion of international debt were passed strongly onto domestic lending rates, provoking a severe recession.

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Article provided by Banco de la Republica de Colombia in its journal Ensayos sobre Política Económica.

Volume (Year): 27 (2009)
Issue (Month): 60 (Diciembre)
Pages: 12-45

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Handle: RePEc:bdr:ensayo:v:27:y:2009:i:60:p:12-45
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  1. Anonymous, 0. "Economic Development And Aid," Increasing Understanding of Public Problems and Policies, Farm Foundation.
  2. repec:tep:teppwp:wp1215 is not listed on IDEAS
  3. Anonymous, 0. "Economic Growth Through Regional Associations," Increasing Understanding of Public Problems and Policies, Farm Foundation.
  4. Ben S. Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 77-128.
  5. N/A, 2002. "Documents," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 3(2), pages 336-337, September.
  6. N/A, 2002. "Documents," South Asian Survey, , vol. 9(2), pages 287-304, September.
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