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Asymmetric Effects of Terms of Trade Shocks on Tradable and Non-tradable Investment Rates: The Colombian Case

Author

Listed:
  • Camilo Alberto Cárdenas-Hurtado

    () (Banco de la República de Colombia)

  • Aaron Levi Garavito-Acosta

    () (Banco de la República de Colombia)

  • Jorge Hernán Toro-Córdoba

    () (Banco de la República de Colombia)

Abstract

Terms of trade (ToT) shocks drive business cycles and have direct impact on the macroeconomic equilibrium conditions in commodity-exporter countries. ToT shocks also affect the dynamics of other variables such as national income and relative prices, and consequently, cause agents and firms to adjust their saving, spending and investment decisions accordingly. The latter is of special interest because of its link with potential GDP and the capital stock of the economy, relevant concepts when assessing sustainable and long-run growth. In this document we explore how tradable and nontradable investment rates respond asymmetrically to ToT shocks. We estimate a Threshold VAR (TVAR) in which the ToT are the transition variable. The empirical results suggest the existence of two regimes (low and high ToT levels) and that ToT shocks have different effects on tradable and nontradable investment rates depending not only the direction of the shock, but also on the levels from which the shock departs. **** Los choques de Términos de Intercambio (TdI) determinan en parte los ciclos económicos y tienen impacto directo en el equilibrio macroeconómico en los países exportadores de materias primas. Estos choques también afectan las dinámicas de variables como el ingreso nacional y los precios relativos, haciendo que los agentes y las firmas ajusten sus decisiones de ahorro, gasto e inversión. La inversión es de especial interés debido a su vínculo con el PIB potencial y el stock de capital de la economía, conceptos que resultan relevantes al evaluar el crecimiento sostenible y de largo plazo. En este documento se estudian cómo las inversiones transable y no transable reaccionan de forma asimétrica a choques de TdI. Estimamos un modelo VAR por umbrales (TVAR) en el cual la variable de transición son los TdI. Los resultados sugieren la existencia de dos regímenes (de altos y bajos TdI) y que los choques de TdI producen respuestas asimétricas en la inversión transable y no transable, dependiendo no sólo de la dirección del choque, sino del nivel de TdI desde el cual se parte cuando éste sucede. Classification JEL: C32, F41, O11, P45, Q31, Q37.

Suggested Citation

  • Camilo Alberto Cárdenas-Hurtado & Aaron Levi Garavito-Acosta & Jorge Hernán Toro-Córdoba, 2018. "Asymmetric Effects of Terms of Trade Shocks on Tradable and Non-tradable Investment Rates: The Colombian Case," Borradores de Economia 1043, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:1043
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    References listed on IDEAS

    as
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    Keywords

    Asymmetries; Terms of Trade; Shocks; Tradable and Nontradable Investment Rates; Threshold VAR; Nonlinearities; Colombia.;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P45 - Economic Systems - - Other Economic Systems - - - International Linkages
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade

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