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Effects of Booms and Oil Crisis on Colombian Economy: A Time-Varying Vector Autoregressive Approach

Author

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  • Ligia Alba Melo-Becerra
  • Ligia Marcela Parrado-Galvis
  • Jorge Enrique Ramos-Forero
  • Héctor Manuel Zarate-Solano

Abstract

The aim of this paper is to estimate the impact of price and oil production shocks on macroeconomic variables such as public debt, real exchange rate, and Colombian economic activity. This country depends to a large extent on oil exports, which could lead to different obstacles in macroeconomic management when prices and oil production record fluctuations. The paper first describes the importance of oil in Colombia, which went from being a completely-importing country in 1976 to an oil exporting economy in 1986. The empirical analysis uses a time-varying vector autoregressive methodology, which assumes that the relation between prices and oil production with macroeconomic variables changes dynamically. The results confirm that there are different stochastic volatility patterns of the variables included in the model. According to the impulse response functions, positive oil price shocks did not cause significant effects on the real exchange rate or on government debt. However, the negative price shock in 2015 led to a real depreciation and an increase in public debt.

Suggested Citation

  • Ligia Alba Melo-Becerra & Ligia Marcela Parrado-Galvis & Jorge Enrique Ramos-Forero & Héctor Manuel Zarate-Solano, 2020. "Effects of Booms and Oil Crisis on Colombian Economy: A Time-Varying Vector Autoregressive Approach," Revista de Economía del Rosario, Universidad del Rosario, vol. 23(1), pages 31-63, June.
    • Handle: RePEc:col:000151:018113
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    File URL: https://revistas.urosario.edu.co/index.php/economia/article/view/8631
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    Citations

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    Cited by:

    1. Taufeeque Ahmad Siddiqui & Haseen Ahmed & Mohammad Naushad & Uzma Khan, 2023. "The Relationship between Oil Prices and Exchange Rate: A Systematic Literature Review," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 566-578, May.
    2. Rodríguez, Gabriel & Vassallo, Renato & Castillo B., Paul, 2023. "Effects of external shocks on macroeconomic fluctuations in Pacific Alliance countries," Economic Modelling, Elsevier, vol. 124(C).
    3. Gabriel Rodríguez & Renato Vassallo, 2022. "Time Evolution of External Shocks on Macroeconomic Fluctuations in Pacific Alliance Countries: Empirical Application using TVP-VAR-SV Models," Documentos de Trabajo / Working Papers 2022-508, Departamento de Economía - Pontificia Universidad Católica del Perú.

    More about this item

    Keywords

    Oil shocks; Colombia; public finances; tpv-var;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • I10 - Health, Education, and Welfare - - Health - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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