IDEAS home Printed from https://ideas.repec.org/p/boc/bocoec/283.html
   My bibliography  Save this paper

Macroeconomic Policy Implications of Oil in Colombia

Author

Listed:
  • Robert G. Murphy

    () (Boston College)

Abstract

This paper develops and applies a small econometric model to illustrate the likely short-term macroeconomic effects on the economy of Colombia resulting from the recent discovery and planned development of new oil resources. In performing the analysis, the paper considers various assumptions concerning government fiscal, monetary, and exchange-rate policies so as to assess the ability of policy to influence the effects that the oil discovery will have on the economy. Comparisons of these alternative policy simulations strongly suggest that appropriate macroeconomic policies can reduce significantly the negative consequences of the 'Dutch disease,' the symptoms of which are reflected in an over-valued exchange rate and declining non-oil export and import-competing sectors. The simulations also demonstrate, however, that some degree of relative price adjustment will be needed for the Colombian economy. In particular, attempts to limit relative price adjustment through the real exchange rate simply force the requisite relative price adjustment to occur through domestic price inflation in reducing the real purchasing power of the peso. Managing this tradeoff between domestic price inflation and real appreciation of the exchange rate should be the overriding concern of macroeconomic policy.

Suggested Citation

  • Robert G. Murphy, 1994. "Macroeconomic Policy Implications of Oil in Colombia," Boston College Working Papers in Economics 283, Boston College Department of Economics.
  • Handle: RePEc:boc:bocoec:283
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. António Portugal Duarte, 2005. "Purchasing power parity: an empirical study of three EMU countries," International Finance 0505010, EconWPA.

    More about this item

    Keywords

    Oil; Dutch Disease; Colombia; Macroeconomic Policy;

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boc:bocoec:283. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F Baum). General contact details of provider: http://edirc.repec.org/data/debocus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.