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Systemic Risk, Aggregate Demand, and Commodity Prices: An Application to Colombia


  • Javier Guillermo Gómez-Pineda

    (Banco de la República, Colombia)

  • Juan Manuel Julio-Román

    (Banco de la República, Colombia)


We embed a small open economy model for Colombia into the systemic riskmodel of Gómez, Guillaume, and Tanyeri (2015). The small open economy model is estimated by Bayesian methods and used for analysis and projections. Parameters estimates are constrained to yield an appropriate behavior to impulse responses, the evolution of latent variables, equation fit, error decompositions, and model forecast performance. The model enables us to give a consistent treatment of shocks to systemic risk, country risk, oil and commodity prices because rest-of-the-world variables are endogenous among themselves instead of exogenous restof-the-world variables for Colombia so that its economy responds to the reaction of these variables to the shocks of interest. Among other results we found that the identified episodes of retrenchment and buoyancy in systemic risk were transmitted to Colombia’s country risk premium and that systemic risk shocks are important drivers of Colombia’s output and unemployment gaps. Finally, aggregate demand-related shocks are unimportant drivers ofnoncoreinflation in Colombia. This result contrasts with findings for other countries.

Suggested Citation

  • Javier Guillermo Gómez-Pineda & Juan Manuel Julio-Román, 2016. "Systemic Risk, Aggregate Demand, and Commodity Prices: An Application to Colombia," Monetaria, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 1-40, January-j.
  • Handle: RePEc:cml:moneta:v:4:y:2016:i:1:p:1-40

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    References listed on IDEAS

    1. Dooley, Michael & Hutchison, Michael, 2009. "Transmission of the U.S. subprime crisis to emerging markets: Evidence on the decoupling-recoupling hypothesis," Journal of International Money and Finance, Elsevier, vol. 28(8), pages 1331-1349, December.
    2. Juan Manuel Julio & Ignacio Lozano & Ligia Alba Melo, 2013. "Global risk appetite and EMBI-Colombia: evidence on a structural break and the fiscal policy role," Revista ESPE - ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 31(72), pages 67-73, December.
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    Cited by:

    1. Javier G. Gómez-Pineda, 2017. "Volatility Spillovers and Systemic Risk Across Economies: Evidence from a Global Semi-Structural Model," Borradores de Economia 1011, Banco de la Republica de Colombia.

    More about this item


    global risk; financial linkages; commodity prices;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies


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