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Monetary Policy and Accumulation of Reserves in an Emerging Economy: A dsge Model for the Colombian Case

Author

Listed:
  • Jesús Botero G
  • Álvaro Hurtado Rendón
  • Humberto Franco G.
  • José García Guzmán

Abstract

This article presents a dynamic stochastic general equilibrium model in which we explicitly include the demand for money, the investment decisions, the role of financial intermediaries and the central bank balance sheet. The model allows the evaluation of the impact of various exogenous shocks on the economic activity and the price levels. Similarly, it allows to assess different forms of central bank intervention in the economy, either through the interest rate, or through the accumulation of international reserves. Special attention is dedicated to the basic parameters of the utility function of households (risk aversion, elasticity of labor supply and demand for money), to the proper formulation of the balance sheets of economic agents, and to the relationship between the central bank balance sheet and the money supply.

Suggested Citation

  • Jesús Botero G & Álvaro Hurtado Rendón & Humberto Franco G. & José García Guzmán, 2018. "Monetary Policy and Accumulation of Reserves in an Emerging Economy: A dsge Model for the Colombian Case," Revista de Economía del Rosario, Universidad del Rosario, vol. 21(2), pages 309-339, December.
    • Handle: RePEc:col:000151:017972
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    File URL: https://revistas.urosario.edu.co/index.php/economia/article/view/7201
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    More about this item

    Keywords

    DSGE; monetary policy; fiscal policy; economic theory;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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